Introduction

The concept of retirement age plays a significant role in the financial planning of millions of workers around the world. In the United States, understanding full retirement age is crucial for determining when you can maximize your Social Security benefits. This article will outline how to calculate your full retirement age and its impact on your Social Security benefits.

What is Full Retirement Age?

Full Retirement Age (FRA) refers to the age at which you become eligible for full, unreduced Social Security benefits. While you can claim your Social Security benefits before reaching FRA, doing so results in a permanent reduction in your monthly payouts. On the other hand, delaying claiming until after FRA leads to an increase in benefits.

How is Full Retirement Age Determined?

Full retirement age varies based on the year of birth. The Social Security Administration (SSA) uses a three-tier system to determine an individual’s FRA:

1. For those born before 1938, FRA is set at age 65.

2. For those born from 1938 to 1959, FRA gradually increases from 65 years and two months to 66 years and ten months.

3. For those born in 1960 or later, FRA is set at age 67.

To find out your specific FRA, consult this chart provided by the SSA: [here] (https://www.ssa.gov/oact/progdata/ar_drc.html)

Early Retirement & Reduction of Benefits

You have the option to claim your benefits before reaching full retirement age, starting as early as age 62. However, doing so comes with a caveat – it significantly reduces the amount you receive each month. The reduction happens as follows:

1. For each month claimed before FRA up to 36 months, benefits are reduced by 5/9th of 1%.

2. Beyond 36 months, benefits are reduced an additional 5/12th of 1% per month.

For example, if your FRA is 67 and you decide to claim benefits at age 62, this equates to a total reduction of 30% (25% for the first 36 months plus an additional 5% for the remaining 12 months).

Delayed Retirement & Increase in Benefits

On the other hand, if you defer claiming your benefits past your full retirement age, you’ll be rewarded with an increase in monthly payments known as Delayed Retirement Credits (DRCs). For every year you delay claiming benefits beyond your FRA up to age 70, your monthly benefits will increase by a certain percentage. The specific percentage varies by birth year but usually falls between 6% and 8%.

Conclusion

Your full retirement age plays a significant role in determining your Social Security benefits. By understanding the relationship between your FRA and benefit payments, you can make more informed decisions about when to file for Social Security and maximize your payouts in retirement.