If you haven’t reached age 62 yet, you aren’t eligible for Social Security retirement benefits — but you will be in the future, as long as you work long enough. These future retirement checks will likely be an important source of income, and it’s important to know how they work and what they’re likely to do for you in your senior years.
In particular, you should be aware that there’s good news and bad news when it comes to a key Social Security rule that affects the size of your benefit checks.
Here’s the good news for future retirees
Let’s start with the positive. Over the past several years, each new group of people who have become eligible for Social Security has had to wait longer than the people who came before them to get their full standard benefit.
Your standard benefit is the amount of Social Security retirement income you’re eligible for based on your average earnings during your 35 highest-earning years. It’s also called your primary insurance amount (PIA). You’ll only receive your PIA if you claim your first benefit check at a specific age designated by the Social Security Administration. The specific age is referred to as your full retirement age (FRA).
For those turning 62 in 2022 or later, FRA is 67 years old. But for anyone who turned 62 before then, FRA was earlier.
For anyone who hit 62 in 2021, FRA was 66 and 10 months.
For those who reached 62 and first became eligible for benefits in 2020, it was 66 and 8 months.
For those turning 62 in 2019, it was 66 and 6 months.
You’re probably noticing a trend here. Full retirement age is based on birth year, and it’s been gradually moving later by two months for anyone who was born in 1955 or after. For those born before then, it was 66 for anyone with a birth year between 1943 and 1954. For Americans older than that, it was 65.
FRA won’t be changing after 2022, though. Everyone who reaches 62 and becomes eligible for Social Security benefits going forward will have the same FRA of 67. That means, unlike your older peers, you won’t have to worry that FRA keeps shifting and forces you to put off your claim for benefits by at least two months more than those who came immediately before you.
Here’s the bad news
The bad news, of course, should be obvious. While future retirees don’t have to worry about FRA shifting later, the reason this isn’t a concern is that they’re already stuck with the latest possible full retirement age.
Not only does this mean that they can’t claim their full benefit until 67 — well after most people end up retiring — but there are also two other important consequences to be aware of.
Working while collecting Social Security could impact benefits for longer: Once you reach FRA, you can work as much as you want without Social Security benefits being impacted. But that’s not the case if you haven’t hit FRA yet. Benefits will be reduced by $1 for every $2 earned above $19,560 if you won’t reach FRA during the full year you’re working, and for $1 for every $3 earned above $51,960 if you’ll hit FRA at some time during the year but haven’t yet. If you anticipate working and getting benefits at the same time, you must be aware these rules will affect you for longer due to your later FRA.
They’ll have fewer chances to increase benefits due to delayed retirement credits: Delayed retirement credits raise your standard Social Security benefit by 2/3 of 1% per month for every month you don’t claim a check after reaching FRA. With the latest possible FRA of 67, you can earn a maximum of three years of these credits since they’re available only until age 70. This means the most you can increase your benefit is 24% above the standard amount, while earlier retirees could get a bigger boost.
Future retirees should take into account that having the latest possible FRA affects the potential income Social Security can provide. They should plan accordingly in estimating the amount they’ll receive as well as deciding when to claim benefits and whether to work while receiving them.
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