Understanding Full Retirement Age: Why It Matters More Than You Think
One of the most common questions we hear is, "I'm turning 65. Doesn't that mean I'll receive my full Social Security benefit?"
It's an understandable assumption, but for most people, the answer is no.
Many people are surprised to learn that age 65 is no longer considered Full Retirement Age for Social Security retirement benefits. Instead, your Full Retirement Age (often abbreviated as FRA) depends on the year you were born. For many Americans retiring today, FRA falls somewhere between age 66 and 67.
While that may seem like a small difference, understanding your Full Retirement Age can have a significant impact on your retirement income.
What Is Full Retirement Age?
Full Retirement Age is the age at which you're eligible to receive 100% of the Social Security retirement benefit you've earned based on your work history.
If you begin collecting benefits before reaching your Full Retirement Age, your monthly benefit will generally be permanently reduced. If you wait until after your Full Retirement Age, your benefit may continue to increase through delayed retirement credits until age 70.
That's why knowing your Full Retirement Age is an important part of building a retirement income strategy.
What Happens If You Claim Early?
You can begin receiving Social Security retirement benefits as early as age 62.
For some people, claiming early makes perfect sense. You may need the income, have health concerns, retire earlier than expected, or simply decide that receiving benefits sooner better fits your financial goals.
However, claiming early comes with a tradeoff: your monthly benefit is reduced because you'll likely receive payments over a longer period of time.
The reduction is permanent, so it's worth carefully evaluating whether the additional years of payments outweigh the smaller monthly benefit.
What Happens If You Wait?
On the other hand, delaying benefits beyond your Full Retirement Age can increase the amount you receive each month.
In fact, your benefit generally increases each year you delay claiming, up until age 70.
For retirees who expect to live a long retirement, a larger guaranteed monthly benefit may provide greater financial flexibility later in life. However, delaying isn't automatically the right decision for everyone. Your health, other retirement income sources, tax situation, and overall financial plan should all be part of the conversation.
Why Your Claiming Decision Matters
Choosing when to begin Social Security isn't simply about picking an age.
It's about understanding how that decision fits into your broader retirement picture.
Questions worth considering include:
Will Social Security be your primary source of retirement income, or just one piece of your overall plan?
Do you plan to continue working after you begin receiving benefits?
Could delaying benefits allow your investment accounts more time to grow?
How might your claiming decision affect a spouse or survivor benefit?
These are the types of questions that can make a meaningful difference over the course of a retirement that may last 20 to 30 years or longer.
Key Takeaway
Your Full Retirement Age is more than just a milestone, it's an important factor in determining how much you'll receive from Social Security.
Claiming benefits at the right time depends on far more than your birthday. A thoughtful claiming strategy should consider your retirement goals, income needs, health, family situation, and long-term financial plan.
Because every situation is different, there isn't a one-size-fits-all answer.
If you're approaching retirement and wondering when it makes the most sense to claim Social Security, we'd be happy to help you evaluate your options and determine how Social Security fits into your overall financial strategy.
We proudly serve clients across the country, and throughout Southwest Florida with offices in Cape Coral, Babcock Ranch, and Naples, Florida.
If you'd like to discuss your retirement planning strategy or learn how Social Security may fit into your overall financial plan, we'd love to connect. Give us a call.
239-424-8305
www.dgateswealthmanagement.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.