As you prepare for retirement, you should keep in mind one crucial part of the planning process that is often neglected: choosing when you'll start the clock on your Social Security benefits. Understanding your full retirement age (FRA) is the first step in choosing the best time to receive your benefit.
- Your full retirement age is used to determine how much you receive in Social Security benefits.
- Your benefit amount is determined by how much you've earned and the age you started collecting your benefits.
- Benefits are reduced if you begin them before your full retirement age.
Factors in Calculating Your Monthly Benefit
The U.S. Congress and the Social Security Administration (SSA) define your FRA based on your birth year. Your FRA will impact the rest of your retirement planning process because the SSA calculates the amount of your monthly retirement benefit using just two figures:
- Your lifetime earnings history
- The age at which you begin collecting your retirement benefit as compared to your FRA
The SSA adjusts your actual earnings to account for changes in wages since you earned that money, based on the 35 years during which you earned the most money. It then applies a formula to determine the basic benefit you would receive at your FRA.
FRA According to Birth Year
If you were born in 1937 or earlier, from 1943 to 1954, or in 1960 or later, determining your FRA is simple. If you're in the first group, your FRA is 65. If you're in the second group, your FRA is 66. And if you're in the third group, your FRA is 67.
For other yearly spans, the FRA is slightly modified. If you were born from 1938 to 1942, your FRA is 65 and some months. And if you were born from 1955 to 1959, your FRA is 66 and some months.
|Full Retirement Age by Birth Year|
|Year of Birth||Full Retirement Age|
|1938||65 and 2 months|
|1939||65 and 4 months|
|1940||65 and 6 months|
|1941||65 and 8 months|
|1942||65 and 10 months|
|1955||66 and 2 months|
|1956||66 and 4 months|
|1957||66 and 6 months|
|1958||66 and 8 months|
|1959||66 and 10 months|
Strangely, the SSA tolls ages ever so slightly off from most calendars. If you were born on the first day of a month, the SSA uses the previous month to figure your FRA. That means if you were born on January 1, the SSA considers you to have been born in the previous year.
Options for Early Retirement
Social Security retirement benefits are actually available as early as age 62, but with a slight caveat. The SSA considers your FRA to be the "normal" retirement age; filing for retirement benefits during any year from when you reach age 62 to the year before you reach your FRA is considered "early" retirement. If you choose to collect your benefit earlier than your FRA, you also opt for a permanently reduced benefit in exchange for starting to collect it early, meaning you'll see a smaller check each month.
There may be reasons that retiring early is the smart choice. For instance, you might have another retirement savings account to make up for the lower monthly benefit check; you may be able to afford to retire without the SSA benefit altogether.
Your benefits increase for every month you do not begin receiving them after age 66. When you reach 70, they stop increasing. There is no reason to not start your benefits after you turn 70.
What Is the Effect of Early Retirement?
As mentioned, people who retire early face a smaller monthly benefit payment, and the amount is very clearly defined in the law. If you choose to retire before your FRA, your monthly benefit will be reduced by as much as 30%. The choice will affect your spouse as well. If your spouse chooses to retire before their FRA, the monthly benefit they could collect from your Social Security will be reduced by as much as 35% from the usual 50% amount a spouse would receive at FRA. The chart below shows payment details for someone retiring at age 62.
|Reduction in Benefit for Early Retirement|
|Year of Birth||Months Between Age 62 and FRA||Percentage of Reduction in Benefit||Percentage of Reduction in Benefit for Spouse|
|1937 or earlier||36||20%||25%|
|1960 and later||60||30%||35%|
You must be 62 for the entire month to begin receiving Social Security payments in that month, so you will collect your first benefit in the month after your birthday.
How to Estimate Benefits by Birth Year
The SSA's website offers a series of charts based on birth year that outline benefit amounts you and your spouse at many points before and at your FRA. As of June 2021, 1960 was the latest year available.
The earliest you can apply for Social Security benefits is three months before you turn the age at which you expect to retire and want to begin receiving benefits.