About 96% of American workers are covered by Social Security, making it the nation's largest retirement program by far. However, only 26% of Americans can correctly identify their full Social Security retirement age, according to a 2017 Fidelity survey.
Despite this lack of knowledge, your Social Security full retirement age can be a crucial component of you retirement income planning. With that in mind, here's your Social Security full retirement age, and why it's so important to know.
Your Social Security full retirement age
Here's the easy part. Depending on when you were born, current workers' Social Security full retirement age can be as early as 66 years old or as late as 67, or somewhere in between. It depends on the year you were born.
This chart can help you determine your full retirement age, or FRA.
This is the age at which you're entitled to receive your entire Social Security monthly retirement benefit, as calculated by the Social Security Administration's (SSA's) formula.
Americans who are eligible for benefits can choose to start theirs at any point after age 62, and your full retirement age determines how much you'll actually get.
Early Social Security can reduce your benefit as much as 30%
The most common age to start Social Security is not at full retirement age. In fact, 32% of men and 37% of women apply for their Social Security benefit to start at age 62 -- the earliest age possible. And to be clear, there are some perfectly good reasons to claim early, such as early retirement, a layoff later in your career, or if you're in poor health.
However, it's important to be aware that claiming early permanently reduces your Social Security benefit, and the magnitude of the reduction might surprise you.
Specifically, the SSA uses these two reduction rules:
- For as many as 36 months before your full retirement age, your benefit will be reduced at a rate of 6.67% per year (about 0.56% per month).
- Beyond 36 months, your benefit will be further reduced by 5% for each year (0.42% per month) before full retirement age you claim benefits, as early as age 62.
So, if your full retirement age is 67 and you claim your retirement benefit at age 62, it will be permanently reduced by 30%. On the other hand, if you were born in 1956 and claim at 62, your reduction percentage is about 27.84%. If your full retirement benefit is $2,000 per month, this is a $43.20 difference.
Late Social Security can give you more inflation-protected income for life
On the other hand, if you wait beyond your full retirement age to claim your benefit, it will result in a permanently increased benefit.
For every year you wait past your full retirement age, your benefit will be permanently increased by 8% (2/3 of 1% per month). This delayed retirement credit is applied until as late as age 70, at which point no further increase will be given.
So, if your full retirement age is 67, waiting until age 70 will result in a permanent 24% increase. This turns a $2,000 monthly retirement benefit into $2,480 -- a big difference. Surprisingly, only about 4% of Americans wait as long as possible.
Just a reference point
As a final thought, it's important to mention that your full Social Security retirement age is simply a starting point the SSA uses to determine your retirement benefit. There's no big incentive or compelling reason to start Social Security at exactly your full retirement age, and fewer than one-third of Americans do.
Having said that, Social Security is a key part of financial security in retirement, and it is also the only part of many retirees' income that is inflation-protected, so it's important to know what your full retirement age is, and how the age you decide to claim benefits can affect your income.
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