There's a Huge Misconception About Social Security's Full Retirement Age -- and It Has the Potential to Hurt Your Finances

One nice thing about Social Security is that you get choices when it comes to signing up. You can file for benefits any time after you turn 62. But you're not entitled to what the program considers your full Social Security benefit (calculated based on your personal earnings history) until you reach your full retirement age, or FRA.

In a recent MassMutual survey, older Americans were asked whether 65 constitutes FRA for Social Security for all seniors, regardless of their year of birth. For the record, it does not. But only 55% of respondents got that question correct.

In fact, if you haven't retired yet, 65 is definitely not your FRA. And if you don't know your FRA, it's imperative that you acquire that information well ahead of your filing decision.

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An important number to know

Your FRA for Social Security is determined based on the year of your birth.

Data source: Social Security Administration.

Here's why you really need that information. Let's say you're entering retirement with a relatively small amount of personal savings -- which, unfortunately, is the case for a lot of people. You may need every penny out of Social Security you can get to cover your bills. Knowing your FRA could help you avoid permanent reductions in your monthly benefits.

In that context, the fact that many older Americans think that their FRA is 65 is a problem. While 65 is when Medicare eligibility begins, it's not FRA for anyone nearing retirement today.

If you claim Social Security at 65 thinking it's your FRA, you'll be reducing your monthly benefits by as much as 13.34%. That could be financially devastating for someone entering retirement without savings. So it's important not to get that information wrong. (And for the record, it's common for people to enroll in Medicare prior to filing for Social Security to avoid that reduction in monthly benefits.)

There are filing options beyond FRA

If you claim Social Security at your precise FRA, you'll get the exact monthly benefit your earnings history renders you eligible for. But if you want to do better, you can always delay your filing past your FRA.

For each year you do, your monthly benefit gets an 8% boost. (Those delayed retirement credits are prorated at 0.67% a month.)  So if you're looking at an FRA of 67 but you hold off on taking Social Security until 70, you can set yourself up with a monthly benefit that's 24% higher -- for life.

Of course, delaying Social Security has some drawbacks, like having to wait to get the money and potentially having to hold off on retiring altogether. But it's a reasonable option to consider if you know you're not bringing enough savings with you into your senior years.

Either way, you really can't make an informed Social Security filing decision without knowing your FRA. If that's not a number you know already, use the above table to figure it out, and commit it to memory.