Social benefits can be a significant source of income upon retirement, and the more you know about how your benefit amount is calculated, the easier it will be to maximize your monthly payments.
There are many decisions that will affect the amount you receive each month, but one of the most important is the age at which you start claiming. However, there is one important figure that the majority of adults cannot mention: their full retirement age.
What is your full retirement age?
Your full retirement age (OFF) is the age at which you will receive the full benefit amount to which you are entitled. If you were born in 1960 or later, your FRA is 67 years old. Those born before 1960 have an FRA of either 66 or 66 and a certain number of months, depending on the exact year of birth.
If you did not know your FRA from the top of your head, you are not alone: Only 16% of adults named their FRA correctly in a 2021 National Retirement Institute survey.
In addition, many study participants guessed that their FRA is lower than it actually is. While everyone’s FRA will fall somewhere between the ages of 66 and 67, the average guess was 61 years old. Even among baby boomers (the generation closest to retirement), the average rating was 64 years old.
Why does your FRA matter?
Not knowing your FRA may not seem important, but it can have a big impact on your retirement strategy.
If you requirements earlier than your OFF, you will receive reduced payments – up to 30% less than your full benefit amount. By waiting for after your FRA to fileyou will earn extra each month on top of your full benefit amount.
When you are unsure of your FRA, it is possible to make a mistake sooner or later. For example, if you think your FRA is 64 when it really is 67, you might think that you will receive your full benefit amount when you actually receive reduced payments. Or if you claim 67 and think your FRA is 64, you can expect to receive larger checks when in fact you are only collecting your full benefit amount.
Finally, your benefit amount is generally locked once you have submitted your application (except for annual cost of living adjustments). If you make a mistake early on, you may end up with these minor payments for the rest of your life.
Maximizing your benefits
Once you know your FRA, you can decide if you want to require social security at that age, file earlier, or delay benefits.
There are pros and cons to each option, and there is not necessarily a right or wrong answer to what age to claim. Just make sure you know the consequences of filing early or late as it will affect the size of your monthly checks.
While this may not seem like it, your FRA can have a significant impact on your social security strategy. Once you know this number and have a plan for what age you want to apply for benefits, you can make sure you retire as prepared as possible.
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