There are a lot of things seniors must know to plan for retirement successfully and to ensure they maximize their monthly income. But one crucial number stands out among all others. Retirees must be aware of it to make the best choice about when to claim Social Security.
Not knowing this number could be a costly mistake, as it could inadvertently lead to a bad choice about starting retirement benefits that costs hundreds of dollars per month in missed income.
Every retiree needs to know this Social Security number
The one crucial number every senior needs to be aware of is their full retirement age (FRA).
Now, you may not have heard of full retirement age, but it’s important to know it because it can determine how much Social Security income you receive. See, the Social Security Administration assigns one to everyone based on the year they were born. While FRA used to be 65, it’s now at least 66 and four months for anyone reaching the age of 66 this year or later. And it could be as late as the age of 67.
The table below shows exactly when yours is, based on when you were born.
Full Retirement Age
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 and later
Why do you need to know your FRA?
So now that you know your full retirement age, you may be wondering why it matters. The biggest reason is because your choice of when to claim Social Security benefits, relative to FRA, will determine the amount of monthly income you get.
If you want your standard benefit — which equals a percentage of wages earned during the 35 years your income was highest — you must get your first Social Security check at exactly your full retirement age. For those turning 66 this year, that would be 66 and 4 months.
But you have the option to start benefits well before hitting this milestone, as checks become available as soon as you turn 62. Unfortunately, if you opt to file early, a monthly penalty applies for every single month you get a check before FRA. So if you were born in 1956 and filed for benefits to start on your 66th birthday, you’d be hit with four months of early filing penalties.
These penalties equal five-ninths of 1% per month for the first 36 months and five-twelfths of 1% for each month after that. So a claim made two months ahead of schedule would reduce your monthly payment by around 1.1%. A claim made a year early, on the other hand, would result in a 6.7% reduction in the size of your Social Security checks while one made five years early would leave you with 30% less.
You also have the option to delay the start of your Social Security retirement income until later. For every month after FRA that you forgo a check, you get a benefit boost of two-thirds of 1% from delayed retirement credits. These are ultimately worth an 8% benefit increase for each year of delay, although they can only be earned until age 70.
If you don’t know your FRA, you can’t possibly calculate how your age when you claim benefits will affect the money Social Security provides. Since these retirement benefits are a crucial source of income for most seniors, knowing when the Social Security Administration says you can retire with your standard benefit is the best way to make the right choices about your finances in your later years.
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