The amount of money you'll receive from Social Security on a monthly basis in retirement will hinge on a couple of factors. The first is your earnings history -- how much money you made during your career and how many years of work you have under your belt.
The second factor that will determine how much monthly Social Security you get is your filing age. You can claim benefits at any age once you turn 62. But you're not entitled to your full monthly benefit until full retirement age (FRA) arrives.
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If you're turning 66 this year, you might assume that you're ready to sign up for Social Security. But you may want to wait a bit longer for one key reason.
FRA may not arrive right away
Your FRA hinges on your year of birth. If you're turning 66 this year, it means you were born in 1958. And in that case, your FRA is 66 and eight months.
You may reach FRA at some point in 2024 if your 66th birthday falls early in the year. For example, let's say your birthday arrives at the end of January. This means that come late September, you'll reach FRA. At that point, you'll be entitled to your full monthly Social Security benefit based on your personal wage history.
But if you're not turning 66 until the summer or fall, then FRA won't arrive in 2024. Rather, you'll have to wait until 2025. And if you sign up for Social Security this year, you'll slash your monthly benefit permanently.
The good news is that the hit your benefit takes shouldn't be that substantial in this scenario. If you file for Social Security six months early, your monthly benefit will be reduced by roughly 3.33%. So if you'd normally be eligible for $2,000 a month from Social Security, filing half a year early would mean getting about $1,933 instead.
That's not catastrophic, especially if you have nice savings to fall back on. But at the same time, why short yourself on about $800 of income per year in retirement if you don't have to?
Waiting beyond FRA could really pay off
There's another good reason not to rush to claim Social Security in 2024 if you're turning 66 this year. Delaying your filing could result in a generous boost to your monthly benefit.
For each year you hold off on Social Security past FRA, your monthly benefit will grow 8%. So let's say that instead of signing up at 66 and eight months, you opt to sign up at 67 and eight months. In that case, your $2,000 monthly benefit will grow to $2,160 -- for life.
The ability to boost your benefit runs out once you turn 70. But if your FRA is 66 and eight months, you'll have ample opportunity to lock in a higher monthly payday.
Of course, if you're set on retiring in 2024, then you may decide that you're going to claim Social Security right away, regardless of the impact it has on your monthly benefit. But it's important to understand the consequences of filing this year if that's the route you intend to take.
