Social Security will probably end up being a substantial income for you down the line. It may not end up being your only source of retirement income — and in fact, it shouldn’t be, since it will only replace a modest portion of your earnings. But still, the great thing about Social Security is that it’s set up to pay you a monthly benefit for life, whereas you might save nicely only to deplete your retirement nest egg at some point in time.
It’s for this reason that it’s so important to understand how Social Security works. If you don’t know the program’s rules, you might end up claiming benefits at the wrong time — and winding up with an income shortfall on your hands.
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What makes you eligible for Social Security benefits in retirement?
To qualify for Social Security benefits as a senior, you need to accrue a total of 40 work credits in your lifetime. And the value of a work credit can change from year to year. But generally, if you work full time for 10 years or more, you shouldn’t have a problem being eligible for Social Security in retirement.
Now, the monthly Social Security benefit you’re eligible for in retirement will hinge on your personal earnings history (specifically, your wages earned during your 35 most profitable years on the job). But you’re not entitled to that complete benefit until you reach full retirement age (FRA).
Unfortunately, some seniors end up shorting themselves on Social Security income because they claim their benefits before FRA. See, you’re allowed to sign up for Social Security as early as age 62. But claiming your monthly benefit before reaching FRA generally means reducing it for the rest of your life. And so it’s important to know what your FRA looks like, since that age hinges on your year of birth.
When can you claim your full Social Security benefit?
Again, you’re allowed to file for Social Security once you turn 62. But if you don’t want to slash your monthly benefit, you’ll need to wait until FRA arrives to claim it. And you can consult this table to see when your FRA is, based on your year of birth:
Year of Birth
Full Retirement Age
1943-1954
66
1955
66 and two months
1956
66 and four months
1957
66 and six months
1958
66 and eight months
1959
66 and 10 months
1960 or later
67
Data source: Social Security Administration.
Another thing you should know is that you’re allowed to delay your Social Security filing beyond FRA. For each year you do this, your monthly benefit will get an 8% boost.
Unfortunately, this incentive does run out once you get to age 70, so there’s no point in delaying your Social Security filing past that point. But still, if your FRA is 67, you have an opportunity to grow your monthly retirement paychecks by 24% — if you’re willing to wait on that money.
An essential number to know
Knowing your FRA for Social Security purposes could put you in a great position to make a wise filing decision. And that’s why having that information is essential — whether you’re nearing retirement or simply want to start planning for the future while you’re still busy plugging away at a job.
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