Your social security benefits are based on your earnings in your 35 best-paid years in the labor market, but you are not entitled to your full monthly benefits until you reach the age of full retirement, or FRA. FRA depends on your year of birth, as follows:
|year of birth||Full retirement age|
|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|
Here’s the problem: in a recent MassMutual survey of near-retirees aged 55 to 65, 31% said that FRA intervenes at age 65, regardless of year of birth. And it’s a misconception that could hurt anyone who believes this.
Your filing age is important
You are allowed to apply for social security before the FRA, but for each month you make your benefits are reduced by a certain percentage. The earliest age you can sign up for benefits is 62, and unsurprisingly, it’s also the most popular age to deposit. But applying for benefits at age 62 with an FRA of 66 will result in a 25% reduction in your monthly social security income. The deposit at 62 with an FRA of 67 will produce a 30% reduction.
Now, if you think your FRA is 65 when you don’t, and then apply for social security, you may end up with a reduction of 6.67% to 13.34% in your benefits monthly, based on your specific FRA. And while a lower monthly benefit may not be that bad if you look pretty good in retirement savings, many seniors fall behind in this regard and, as such, need all the income from the social security they can collect. This is why it is important to know your correct FRA – and use it to guide your deposit decision so that you do not deprive yourself of benefits for life.
Don’t confuse social security and health insurance
One of the reasons why so many older Americans can be confused about 65 being their FRA is that Medicare eligibility begins at 65. But while the two programs are interdependent, you can sign up for one without the other. This means that you can apply for Social Security before age 65, but at a reduced monthly benefit rate, or you can enroll in Medicare at age 65 and wait until the Social Security application is filed until the FRA or even the -of the. That’s right – you can delay your benefits beyond FRA and increase them by 8% per year in the process, until the age of 70, when that incentive runs out.
Get your facts straight
The more you know about social security, the more likely you are to apply for benefits at the right time for you. If you’re among the 31% of Americans who think FRA is 65 in all areas, this could indicate that you lack key knowledge about the program as a whole, so spend some time reading about social security to avoid mistakes that hurt you in the long run.