If you’re thinking about retiring, one of the big questions you’re asking yourself is, “When can I retire?” While there are a lot of things to consider when making a decision about when to retire, one of the big factors can be Social Security.
For most people, Social Security is an important stream of income and, even if you don’t need that income, it can still help you have a more comfortable retirement, achieve goals, or even plan your legacy. But before you go about marking your calendar with a particular date for retirement, you need to know what the retirement age is.
Full Retirement Age (FRA)
If you asked someone what the Social Security retirement age is, they might tell you 65. That’s because most people think about retiring at age 65 and, once upon a time, the Social Security retirement age was 65. These days, however, the situation is a little more complex.
You become eligible for benefits at age 62. That means you can begin claiming your benefits any time after you turn 62; you don’t need to wait. However, if you claim benefits before you reach your full retirement age (FRA), you’ll receive only 80% of your benefit. This reduction is permanent.
For people born between 1943 and 1954, 66 is your FRA. If you were born after 1954, your FRA will be higher; those born in 1960 will have an FRA of 67. If you claim your benefits before you reach your FRA, your monthly income will be reduced because you’ve claimed your benefits “early.” For those with higher FRAs, for example age 67, taking Social Security at age 62 can result in a 30% reduction of benefit.
Be sure to check out what your FRA actually is, since the age is set to gradually increase from 66 to 67 for those born between 1954 and 1960. For example, someone born in 1955 has an FRA of 66 years and 2 months. Don’t simply assume that you’ll reach your FRA on your birthday.
Getting a Bonus
If you wait until you reach FRA, you’ll receive 100% of your benefit. However, there’s no hard and fast rule that says you need to start claiming benefits as soon as you hit your FRA. In fact, you’re better off deferring collection so long as you can afford to do so. For each year you delay collecting benefits, from the time you turn 66 until your 70th birthday, you’ll realize an extra 8% in your monthly payment. That means that if you defer collecting until you turn 70, you’ll get 32% more in monthly income. This is Social Security’s Delayed Retirement Credit.
If you’ve already started collecting benefits or if you’re thinking you’ll need to start them, but you may not need them throughout your retirement, a great option is the start-stop-start method. If you begin collecting your benefits at age 66, but realize another revenue stream or are presented with the option of collecting another benefit, you can always opt to stop your Social Security benefits and restart them later. This method can also benefit married couples, especially those who have a large age gap. It’s useful for single people too, as starting and then suspending benefit collection can help with cash flow.
You might be wondering what age is optimal to begin collecting other benefits, such as spousal benefits or survivor benefits. Your FRA is the best answer. If you collect before you reach your FRA, both of these benefits will be reduced. Unlike your own personal benefit, however, there’s no advantage to waiting; the benefit will not increase after you’ve reached your FRA.