There are A LOT of important things that you need to know about Social Security. But there’s one that’s more important than any of them. That’s your full retirement Social Security age.
I’ve often said that you don’t need to know everything about Social Security to make it work for you. It’s kinda like driving a car. You don’t have to know how the fine mechanical details of the internal combustion…just enough of the basics to keep you safe while you’re operating it. It’s the same way with retirement planning and investing. If you have a firm grip of the basics, you’ll be ok.
The Most Important Factor in Social Security
After reading my book Social Security Basics, someone asked me the other day, “Which of those 9 basics do you think is most important?” I didn’t hesitate. It’s your full retirement social security age!
Understanding at which point you attain the official social security age of full retirement is crucial so you can understand how the benefit reductions and increases will affect you for the various filing ages and so you’ll know at which point the earnings limit will no longer impact you.
Thankfully, this is one of the simpler parts of Social Security. If you were born between 1943-1954, your full retirement age is 66. For every year thereafter, the full retirement age increases all the way to birth year 1960. For everyone born in 1960 or later, the full retirement age is 67 (for now).
Understanding this age is important for two reasons. One, you have a limit on the amount of earnings you can have PRIOR to your full retirement age. Once you reach full retirement age, there is no limit. The second reason is how your full retirement age (FRA) controls the increases or decreases to your benefit amount. We often discuss these increases and decreases in terms of annual numbers, but its really important to know how to figure them on a monthly basis. Afterall, if your FRA is 66 & 6 months, your penalty for filing at 62 will be higher than the individual who has a FRA at 66.
How Monthly Reductions and Increases Work
Here’s the way the monthly reductions and increases work.
At your FRA, you are entitled to 100% of your benefit amount. If you file early, your benefit will be reduced. However, the reduction is different based on how early you file. If you file in the 36 month period immediately prior to FRA, your benefit will be reduced by about .56% per month. For months BEYOND the 36 month period immediately prior to FRA, your benefit is reduced by about .42% per month. If you file after FRA, your benefit will increase by about .67% per month up until age 70.
So with these simple numbers, you can do the math for yourself and not be forced to rely on the SSA to tell you what your benefit will be.
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Thanks so much for reading…have a great day.