The first social security number you absolutely need to know – Community News
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The first social security number you absolutely need to know

Social Security can become a very important source of income once you retire. This is true even if you manage to carry a nice amount of savings into your senior years.

It is for this reason that applying for benefits strategically is so important. And to do that, there is one key number you really need to know.

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Do you know your full retirement age?

The monthly Social Security benefit you are entitled to upon retirement is based on your pay history — specifically, your 35 highest-paid years of earnings during your career. And you are entitled to that benefit as soon as you reach full retirement age or FRA.

You may apply for Social Security before FRA, but there are consequences – which is that you reduce your monthly benefit for life. And you can also claim social security after FRA for increased benefit. But if you don’t know your FRA, it becomes difficult to put together a well-thought-out filing strategy.

Your FRA is based on the year you were born. You can refer to this table to see what yours is:

year of birth

Full Retirement Age

1943-1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 or later

67

Data source: Social Security Administration.

Now let’s say you decide to enroll in Medicare at age 65, which is when you become eligible. You may be tempted to sign up for Social Security at the same time. That way, you can not only start collecting that money, but also avoid having to pay your Medicare premiums because they’re deducted from Social Security payments once you start receiving them.

But if you were born in 1960 or later, filing at age 65 means claiming benefits two years before FRA. And that means you cut your benefit by about 13.34% if you go that way.

In fact, the earliest age you can claim Social Security is 62. But if you file an FRA of 67 at age 62, your benefits will take a 30% hit.

And just to be clear, that reduction is permanent. When you apply for Social Security early, your benefits don’t magically increase to a higher amount once you reach FRA. In exchange for getting your money sooner, you get less of it on a permanent basis.

Put that number in memory

Knowing your FRA will help you make the most of the Social Security income you are entitled to. Imagine retiring without a lot of savings. In that case, you might want a higher Social Security paycheck to make up for that.

For every year you delay your application beyond the FRA, until age 70, your benefits increase by 8%. This means that if your FRA is 67, filing at 70 will result in a 24% increase in your Social Security salary.

But knowing your FRA is crucial to making that decision. And so it’s important that you memorize that number over the course of your retirement planning. It can affect not only your Social Security strategy, but your retirement strategy as a whole.

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