If you talk to a group of retirees, I'm willing to bet that a good number of them will agree on how beneficial Social Security is to their retirement finances. I'm also willing to bet that many of them will confirm that Social Security isn't always the easiest program to navigate.
There is no shortage of numbers surrounding Social Security, and many of them change annually. That said, if you want to cut out some of the noise and focus on some of the most important numbers, look no further than the following chart showing Social Security full retirement ages (FRAs).
It's likely the most important Social Security chart you'll see.
Image source: The Motley Fool.
Your monthly benefit is based on your full retirement age
This is the most important chart you'll see because your FRA plays a key role in determining your monthly Social Security benefit. It's all about when you claim relative to your FRA.
Your FRA is when you're eligible to receive your primary insurance amount (PIA), which you can think of as your baseline monthly benefit amount. From there, your monthly benefit is adjusted based on whether you claim before or after your FRA.
The earliest you can claim Social Security is age 62, but your monthly benefit is reduced based on how far you are from your FRA. If you're within 36 months, benefits are reduced by 5/9 of 1% monthly. Any additional month further reduces monthly benefits by 5/12 of 1%.
If you choose to delay benefits past your FRA, your monthly benefit will increase by 2/3 of 1% for each month, up until you turn 70.
Spousal benefit amounts are based on full retirement ages
Social Security spousal benefits allow someone to receive Social Security benefits based on their partner's work history and earnings record if they've been married for at least a year. To qualify for spousal benefits, you must either be at least 62 years old, caring for a child under 16, or caring for a child with a disability.
The most someone can receive by claiming spousal benefits is 50% of the primary claiming spouse's monthly benefit. For example, if the primary claimer receives $2,000 monthly, the person receiving spousal benefits can receive up to $1,000 if they're at their FRA.
Like standard benefits, spousal benefits are reduced if someone claims them before their FRA, but the reduction amounts differ. If you're receiving spousal benefits and claim before your FRA, monthly benefits are reduced by 25/36 of 1% each month, up to 36 months. Any additional month further reduces benefits by 5/12 of 1% each month.
Social Security's retirement earnings test revolves around your full retirement age
Plenty of people continue to work and earn money after claiming Social Security, whether for financial reasons or because they love what they do and aren't ready to stop. There's absolutely nothing wrong with doing so.
However, if you claim benefits before your FRA, you'll need to monitor how much you earn, because you could have some of your benefits withheld. This is because Social Security will subject you to its retirement earnings test (RET) if you claim benefits early and earn over a certain limit.
The earnings limit is $22,320 for 2024 if you don't reach your FRA this year. Social Security will reduce your monthly benefits by $1 for every $2 you earn over the limit. If you reach your FRA this year, the earnings limit is $59,520, with benefits reduced by $1 for every $3 earned above this amount.
The good news is that your benefits aren't permanently lost due to the RET. Once you reach your full retirement age, Social Security recalculates your benefits and gradually adds the withheld amount.
