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Quick Read
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Claiming Social Security before full retirement age (FRA) reduces your monthly benefits.
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If you’re turning 66 this year, you won’t be reaching FRA.
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Make sure to run the numbers before locking in your monthly benefit for life.
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READ: The analyst who called NVIDIA in 2010 just named his top 10 AI stocks
In the past, many older Americans would wait until age 66 to claim Social Security for one big reason. Age 66 was their full retirement age (FRA), otherwise known as the age when they were entitled to their Social Security benefits without a reduction.
But 66-year-olds who claim Social Security this year may be in for a financial shock. And if that’s your plan, it’s important to understand the reason why.
Know what your FRA looks like
The Social Security Administration has gradually increased FRA to account for changes in life expectancy. For people born between 1943 and 1954, FRA is 66. But people born after that have a later FRA.
FRA increases by two months per birth year after 1954 until maxing out (for now) at 67. So for example, people born in 1955 have an FRA of 66 and 2 months. People born in 1956 have an FRA of 66 and 4 months. And so forth.
Meanwhile, people born in 1960 or later have an FRA of 67. There’s talk of increasing FRA for younger workers to help make up for Social Security’s pending financial shortfall. But that’s far from official.
Either way, if you’re turning 66 this year and are expecting to get your Social Security checks in full, you may be in for an unwanted surprise. That’s because your FRA is not 66; it’s 67. And if you claim Social Security this year, you could see your benefits reduced by about 6.67%.
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Now, let’s say you’re eligible for $2,000 a month in Social Security at FRA. If you file one year early, your monthly checks will be about $1,867 instead.
That could make a huge difference over the course of a decades-long retirement, though. And it could also put you in an unfavorable position if you don’t have a lot of money saved for retirement and you expect Social Security to be your primary income stream.
Know the rules before you file
It’s understandable to get excited about the idea of finally being able to claim Social Security. But if you’re turning 66 this year, know that you won’t be eligible for your monthly benefits in full.
Of course, some people make a conscious decision to claim Social Security early. And you may have your reasons for wanting to do that.
If you have a lot of money saved and you’re ready to retire now, you may be okay with filing a bit early and reducing your monthly benefits. Or, if you’ve discovered you have health issues, it could pay to take benefits sooner rather than wait in order to maximize your lifetime Social Security payday.
But before you file for Social Security, make sure you know your FRA. And also make sure you understand the repercussions of claiming benefits early.
You should also be aware that for each year you delay your Social Security claim past FRA, until age 70, your benefits get a permanent 8% increase. In our example above, a $2,000 Social Security check at FRA could become $2,480 if you file for benefits three years later. Run the numbers before claiming benefits so you don’t make a mistake you regret.
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