How Full Retirement Age Affects Social Security

As you gear up for crucial retirement decisions such as Social Security, you may have heard of “full retirement age.” The Social Security Administration refers to full retirement age as “normal” retirement age. This is the age at which you will receive 100% of your monthly retirement benefit.

But full retirement age isn’t the same for everyone. For those born before 1943, this is age 65. For those born after that year, full retirement age can range from 66 to 67 years old.

This matters for eligible recipients because choosing when they begin receiving benefits is one of the most important retirement decisions that they might make. Making the right choice can make a difference of tens, or even hundreds of thousands of dollars, in the lifetime benefits they are paid.

You can start taking Social Security benefits once you turn 62, but your benefit will be permanently reduced by 30% or more. You will have to wait until you reach your full retirement age to get your full benefit.

And if you delay collecting benefits until after your full retirement age? Then you can increase the amount you receive by about 8% per year until age 70. Waiting to take your benefits at 70 will increase your monthly benefit about one-third more than your regular full benefit.

When Does Your Full Retirement Age Kick In?

Knowing when you will reach full retirement age is a critical factor in your retirement plan. It can help you to decide when you would like to begin collecting benefits.

The Social Security Administration counts your birthday as the day before your actual birthday for the purpose of paying benefits. The full retirement ages for those born in 1943 and after is broken down as follows:

The Month of Your Birthdate Matters for Full Retirement Age

The month of your birthdate is important to the Social Security Administration. However, it doesn’t necessarily reflect the dates when you reach your various milestones.

Sometimes it’s the month after the month of your birthday that counts. Why? Because that is the first month that you are that age for the entire month.

For example, if your birthdate were on January 20, 1954 then you would have turned 62 on January 20, 2016. But you couldn’t start collecting benefits until February. However, when you reach full retirement age in 2020, you can get your first full benefit check in January.

Another exception is the maximum benefit age of 70. Once you reach that age, you can begin collecting your maximum benefit in January.

Special Rule for Those Born on the First Day of a Month

Another twist comes if your birthday falls on the first day of the month. The Social Security Administration will then consider your birth month to be the previous month for the purpose of paying either your full benefit or maximum benefit.

For example, say your birthday was on April 1, 1954. Then you would have reached age 62 on April 1, 2016 and you would have been eligible to start collecting benefits at that time.

But for full retirement age of 66 you can begin collecting your full regular benefit in March of 2020. As for the maximum retirement age of 70, you can start your maximum benefit in March of 2024.

Why Do We Have Full Retirement Age for Social Security?

The full retirement age was modified by legislative reforms in 1983.

One of the key changes was to the full retirement benefit credit. It was scheduled to gradually rise from 3 percent for those retiring before 1990 to 8 percent for those retiring after 2008.

Other legislation raised the age of eligibility for unreduced retirement benefits in two stages to 67 by the year 2027. Workers born in 1938 were the first folks affected by this gradual increase. Benefits were still available at age 62, but they were reduced.

Full Retirement Age, a Benchmark for Retirement Milestones

Today, the full retirement age acts as a marker for two key milestones.

It marks the date on which full retirement benefits are paid out. Not only that, it also serves as the marker date for the earnings test for those who begin taking benefits early while they are still working.

There is also a provision that allows widows and widowers to begin collecting benefits at age 60. Disabled widowers may be able to collect benefits even earlier.

Of course, knowing all of this information by itself still won’t enable you to decide when to begin collecting benefits.

Working Through Your Social Security Claiming Decision

If you plan on working until you are at least 70, then you may be wise to delay collecting benefits until then. But if you have health issues or your family has a history of diminished longevity, then you may come out ahead by electing to receive benefits at age 62.

Look at your estimate of Social Security benefits. Then run some numbers to compare what you will receive if you elect for Social Security benefits at a given age.

It would also be wise to enlist the help of a Social Security consultant — or an experienced, knowledgeable financial professional — who thoroughly understands the rules of Social Security.

Social Security is One Piece of the Retirement Puzzle

Retirement planning is usually a complex process that requires analyses of both your cash flow and balance sheet, as well as portfolio construction. And, of course, you will need to factor your Social Security benefits alongside any pension payouts or other income streams that you will receive.

For these reasons, hiring a financial professional can be very helpful. One way that someone can help you is plugging all of your numbers into a sophisticated computer program that can give you a high-level analysis of how your assets and income might perform during retirement.

Knowing when you will reach your full retirement age is only the first step in retirement planning, but it’s a vital one. You will need to find out when this will be in order to be able to plan your retirement effectively.

Need Help Solving for Your Retirement What-Ifs?

Your financial professional or Social Security advisor can help you to determine when this is, as well as help you to decide when to start collecting benefits. But now is the time to begin planning for retirement.

The longer you wait, the fewer retirement options you will have. If you are ready for personal guidance, help is a click away at SafeMoney.com.

Use our “Find a Financial Professional” section to connect with someone directly and request a personal appointment. If you need a personal referral, call us at 877.476.9723.