In order to make the right choice about when to start your Social Security benefits, you need to know what the Social Security Administration considers your Full Retirement Age (FRA).
Unfortunately, the vast majority of American adults have no idea when that is. This means they are at serious risk of receiving less monthly and lifetime income from one of the nation’s largest government programs.
You can’t afford to miss out on retirement benefits just because you don’t have this basic knowledge, so make it a point to join the minority of Americans who are well versed in what FRA is and why. it is important.
Millions of Americans don’t know their full retirement age
According to a recent survey by Nationally, only 16% of American adults know their full retirement age. With 258.3 million adults in the United States according to recent census data, that means almost 217 million adults are completely in the dark about this significant number.
So what exactly is FRA? This is the age at which a retiree must get their first Social Security check in order to get their standard benefit. The standard benefit is officially called the Primary Insurance Amount (PIA). It is calculated by a formula that involves adjusting average salaries for inflation, determining your average monthly salary over the 35 years of your highest earnings, and paying you benefits equal to a specific percentage of this monthly average.
Traditionally, each retiree reached this milestone at age 65 and received their PIA if they started receiving retirement checks at that time. But thanks to changes in the law in 1983, the FRA was gradually shifted later and it now depends on the year of birth. Here’s when yours is, based on your date of birth:
- It’s 67 if you were born in 1960 or later.
- That’s 66 and 10 months if you were born in 1959.
- It’s 66 and 8 months if you were born in 1958.
- It’s 66 and 6 months if you were born in 1957.
- It’s 66 and 4 months if you were born in 1956.
If you want to receive your standard benefit as determined by what you’ve earned — and poured into the system — over your lifetime, you must deposit checks to start at exactly that age. That’s why it’s such a problem that so many people have no idea when is the right time for them to get their first Social Security payment.
Why is the full retirement age so important?
So what if you do not do do you know what your FRA is? In many cases, you might end up making the choice to claim your Social Security checks at a suboptimal time.
You do not do to have to start receiving retirement income exactly at your FRA. You have the option of starting check-ups at age 62, which could be up to five years earlier. If you’re even a month ahead of getting your first Social Security payment, early deposit penalties reduce the amount of your checks. This reduction lasts for life, and the sooner you claim benefits, the greater they are.
You also have the option to delay the FRA. It may seem strange to wait beyond when you become eligible for your standard benefit, but it can pay off with deferred retirement credits. These increase your monthly payment for each month beyond FRA that you defer to your first Social Security check. These credits can significantly increase your standard benefit, increasing it by two-thirds of 1% per month or 8% per year until age 70.
If you don’t know your FRA, you can’t decide if applying early for a smaller benefit is a better bet or if applying later and a larger monthly check is right for you.
You owe it to yourself to maximize your Social Security income since it is probably the only guaranteed source of retirement funds you will have that will last forever. So make sure you know the details of your full retirement age before you even consider asking for your first cheque.