When it comes to Social Security benefits, one of the most important factors to understand is your "Full Retirement Age" (FRA). Your FRA is the age at which you are eligible to begin receiving full Social Security benefits, meaning you won’t face any reduction in your monthly payments. It’s essential to know your FRA because deciding when to start claiming Social Security can have a significant impact on your retirement finances. In this article, we will explain what full retirement age is, how it’s determined, and how it affects your benefits.
What Is Full Retirement Age (FRA)?
Full Retirement Age (FRA) is the age at which you can begin receiving your Social Security benefits without any penalty. If you choose to start collecting benefits before your FRA, your monthly benefit amount will be permanently reduced. Conversely, if you delay claiming benefits past your FRA, your benefits will increase due to delayed retirement credits. Understanding your FRA is critical for making an informed decision about when to start your Social Security payments.
How Is Full Retirement Age Determined?
Full Retirement Age is determined by the year of your birth. Prior to 1983, the FRA was set at 65 for everyone. However, the Social Security Amendments of 1983 gradually raised the FRA to account for increased life expectancy and ensure the sustainability of the program. As a result, people born in different years have different full retirement ages.
Here’s how FRA is determined based on your birth year:
- Born before 1938: FRA is 65
- Born between 1938 and 1959: FRA increases gradually from 65 to 66
- Born in 1960 or later: FRA is 67
For example, if you were born in 1955, your FRA is 66 years and 2 months. If you were born in 1960 or later, your FRA is 67 years old. The key takeaway is that the earlier you were born, the earlier you can claim full benefits, but the age has gradually increased for those born later.
What Happens If You Claim Benefits Before Your FRA?
If you decide to start receiving Social Security benefits before your Full Retirement Age, your monthly benefits will be permanently reduced. The reduction is based on how many months before your FRA you begin collecting. For every month you claim before your FRA, your benefits will be reduced by a certain percentage, up to 30% for those who start benefits at age 62, the earliest age you can begin receiving Social Security.
For example, if your FRA is 66, but you begin claiming at 62, you’ll receive about 25% less per month than you would at your FRA. If you wait until 65, the reduction is smaller—approximately 13% less than if you waited until age 66.
What Happens If You Claim Benefits After Your FRA?
If you choose to delay claiming benefits past your FRA, you’ll earn delayed retirement credits. These credits increase your monthly benefit by a certain percentage each year you delay your claim, up to age 70. The increase is about 8% per year for individuals born in 1943 or later. This means that by waiting until age 70 to claim your benefits, you could increase your monthly payment by as much as 32% over your full benefit amount.
Delaying your Social Security benefits can make sense if you’re in good health, expect to live a long life, and don’t need the income right away. It can also be beneficial if you want to maximize your benefits for your spouse or heirs, as your benefits may be passed on to them after your death. However, the decision to delay should also consider other factors like health, financial need, and life expectancy.
Why Should You Consider Your Full Retirement Age?
Understanding your Full Retirement Age is important because it can help you make the best decision regarding when to claim Social Security benefits. If you start your benefits too early, you could leave money on the table over time. However, if you wait too long, you may not be able to enjoy the benefits if you don’t live long enough to make up for the delayed start. Everyone’s situation is unique, so weighing the pros and cons based on your health, finances, and retirement plans is key.
Factors to Consider When Deciding When to Claim Social Security
Here are a few key factors to think about when determining when to claim Social Security:
- Your health: If you are in good health and expect to live longer, delaying your benefits might be a good strategy to maximize your monthly payments.
- Your financial situation: If you need income sooner rather than later, claiming early might be the best choice, despite the reduction in benefits.
- Spousal benefits: If you are married, consider how delaying benefits may impact your spouse’s benefits and their financial security.
- Life expectancy: If you have a family history of living well into your 80s or beyond, waiting until your FRA or beyond might make more sense.
Conclusion
Your Full Retirement Age is a key factor in determining the amount of Social Security benefits you’ll receive in retirement. By understanding your FRA, you can make an informed decision about when to begin collecting Social Security to maximize your benefits. Whether you choose to claim early, wait until your FRA, or delay benefits beyond your FRA, it’s essential to consider your personal health, financial needs, and long-term goals. Taking the time to fully understand how FRA impacts your benefits can ensure that you make the right decision for your financial future.