What is full retirement age and why it matters

What is full retirement age and why it matters

Navigating Social Security can indeed feel complicated, but understanding your Full Retirement Age (FRA) is key to making informed decisions about your benefits. Let’s break it down further based on the details you’ve shared.

What is Full Retirement Age (FRA)?

Your Full Retirement Age is the age at which you are entitled to receive 100% of the Social Security retirement benefits you’ve earned through your work history. The Social Security Administration (SSA) sets FRA based on your year of birth, and it’s important because it impacts how much you receive in monthly benefits.

While 65 used to be the FRA for everyone, changes in life expectancy and funding challenges led Congress to gradually increase the FRA. Today, it ranges between 66 and 67, depending on when you were born.

How Does Full Retirement Age Impact Monthly Benefits?

• If you claim benefits at FRA, you will receive your full benefit amount based on your lifetime earnings history.

• Claiming earlier (before FRA) will reduce your monthly benefits. For each month you claim before reaching FRA, your benefit amount will be permanently reduced by a small percentage.

• Claiming later (after FRA) will increase your monthly benefits. Delaying your claim beyond FRA up until age 70 can boost your monthly payments by a certain percentage each year (typically 8% per year after FRA).

Full Retirement Age Chart (Based on Year of Birth)

Here’s a quick reference chart to know when your FRA is:

Birth YearFull Retirement Age1943-195466195566 and 2 months195666 and 4 months195766 and 6 months195866 and 8 months195966 and 10 months1960 or later67

Key Considerations for Social Security

• Timing Your Claim: If you’re in good health and expect to live a long time, it might make sense to delay your benefits until after FRA to maximize the monthly amount. On the other hand, if you need the money sooner, or if your health is a concern, claiming earlier might be the right choice for you.

• Impact of Early Claims: Claiming benefits as early as age 62 (the earliest you can start) means you’ll receive a reduced benefit. The reduction is typically around 25% to 30% less than if you wait until FRA.

• Delaying Benefits: For every year you delay claiming after your FRA, your benefit increases by approximately 8%. This is a guaranteed return, and can be especially beneficial if you expect to live well into your 80s or 90s.

Understanding the full retirement age and its impact on your Social Security benefits is a critical part of planning for retirement. It allows you to align your timing with your financial goals and health outlook.

Estimating Your Benefits at Full Retirement Age

The amount you’ll receive from Social Security at Full Retirement Age (FRA) is based on your average indexed monthly earnings (AIME), which considers your highest 35 years of earnings during your working life. Here's how you can estimate your benefits:

1. Create an Account on the SSA Website
   The easiest way to get an estimate is to create an account on the Social Security Administration website. Once logged in, you can view your Personalized Social Security Statement, which includes estimates for your future benefits at FRA, early retirement (age 62), and delayed retirement (age 70).

2. Use the SSA Online Benefits Calculator
   The SSA also offers an Online Retirement Estimator tool that allows you to estimate your benefits based on your specific work history. You can run different scenarios by adjusting the age you plan to retire, which gives you a clearer picture of how the timing affects your benefits.
   The calculator can also account for changes in your future earnings, if applicable.

Key Factors to Consider When Deciding When to Claim Social Security

Choosing the right time to claim Social Security benefits is one of the most important decisions in retirement planning. Your decision will depend on various factors that impact your financial needs, longevity, and retirement goals. Here are the most important considerations:

1. Your Health

• Good Health & Longevity: If you're in good health and expect to live into your 80s or 90s (especially with a family history of longevity), delaying your benefits until after FRA can significantly increase your monthly payments. By waiting until age 70, you’ll get the maximum monthly benefit.

• Health Concerns: If you have health issues or a shorter life expectancy, claiming early may provide more immediate financial security, even though your monthly payments will be reduced.

2. Income Needs

• Immediate Income: If you need income sooner rather than later, claiming benefits as early as age 62 could make sense, even though your monthly benefits will be reduced permanently. This can help bridge the gap before other retirement income sources kick in.

• Delay for Larger Payments: If you don’t need the money right away and can afford to wait, delaying Social Security will provide higher monthly payments in the future, which could be beneficial for long-term retirement security.

3. Employment Status

• Still Working? If you plan to keep working after you start claiming Social Security, be aware that your earnings can impact your benefits. If you claim before FRA and earn over the SSA’s earnings limit ($21,240 in 2024), Social Security will reduce your benefits for the year. Once you reach FRA, there are no earnings limits, and you can work without impacting your benefits.

• Social Security and Work: If you expect to work part-time or full-time after starting Social Security, it may be wise to consider waiting until after FRA to avoid reductions in benefits.

4. Your Spouse

• Spousal Benefits: If you're married, it’s essential to consider how both you and your spouse will claim benefits. Married couples can optimize Social Security by strategically timing their claims. For example, one spouse may claim early while the other waits to increase their benefits, or both may delay claiming to maximize survivor benefits.

• Survivor Benefits: The spouse who passes away first generally leaves their surviving spouse the option to claim the higher of the two benefits (their own or the deceased spouse’s). Therefore, coordinating the timing of claims can be especially important to ensure the surviving spouse is financially secure.

5. Other Retirement Income

• Additional Income Sources: If you have other sources of retirement income, such as a pension, 401(k), or savings, you might be able to afford to wait until after FRA to claim Social Security, allowing your monthly benefits to grow.

• Drawdown Strategy: If you have substantial retirement savings and can afford to delay Social Security, you may want to use other assets in the meantime to maximize your lifetime Social Security benefits.

Can You Change Your Mind After Claiming Benefits?

Once you file for Social Security, your monthly payment is generally set. However, if you claim benefits before your FRA, you have a 12-month window to change your mind. During this period, you can withdraw your application, repay any benefits you’ve already received, and then reapply later at a higher benefit amount.

This option allows you to reconsider your initial decision, giving you the flexibility to wait for a higher benefit. Keep in mind that the money you’ve received from Social Security must be repaid in full, which could be a significant financial consideration.

Bottom Line: Timing is Key

Your Full Retirement Age is more than just a number—it’s a crucial milestone that determines how much you’ll receive in Social Security benefits. By taking the time to assess your health, financial needs, and long-term retirement plans, you can make an informed decision about when to claim Social Security.

Delaying benefits can provide a larger monthly payout, while claiming early might be beneficial for those who need income sooner or have health concerns. It’s a decision that requires careful thought, but by leveraging available tools like the SSA’s calculators and considering factors such as your spouse’s benefits, income needs, and overall retirement strategy, you can maximize the role Social Security plays in your retirement.

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The Trusted Social Security Advisors blog is all about making sense out of Social Security benefits. The information we provide is based on our understanding of the rules that govern the Social Security Administration and should not substitute for advice from your own financial, legal, or tax advisors.