There’s a strong chance Social Security will wind up playing an important role in your retirement. Maybe you’ll need that money to cover your essential bills, like housing and healthcare. Or maybe you’ll kick off your senior years with enough money in a savings plan to tackle your basic expenses, but you’ll need Social Security to pay for things like travel and entertainment.
Either way, it’s important to get as much out of your benefits as you can. But if you’re misinformed about Social Security, you could wind up locking in a lower monthly benefit for life.
Such is the risk most Americans are taking today. Only 17% of people are able to correctly identify their full retirement age (FRA) for Social Security purposes, according to a recent Fidelity survey. That means most are in the dark about when they’re entitled to receive their benefit in full — and they risk signing up at the wrong time as a result.
What full retirement age means to you
Your monthly Social Security benefit is calculated based on your average monthly wage, adjusted for inflation, over your 35 highest-paid years in the labor force. You’re then entitled to claim that monthly benefit once you reach FRA.
FRA depends on the year you were born, as per the following table:
| Year of Birth | Full Retirement Age |
|---|---|
| 1943-1954 | 66 |
| 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 |
You’re allowed to sign up for Social Security before reaching FRA (eligibility begins at age 62), but for each month you file early, your monthly benefit will be reduced on a permanent basis. Claim Social Security at 62 with an FRA of 67, for example, and your monthly benefit will take a 30% hit.
It’s for this reason that it’s so important to know your FRA before you sign up for benefits. Furthermore, knowing your FRA can help you better plan for retirement in general.
In the aforementioned survey, 44% of Gen Xers underestimated their FRA of 67. But doing so could throw off your retirement plans, because if you think you’re entitled to your full monthly Social Security benefit at age 65 only to discover that’s not the case, you might need to scramble to readjust.
Incidentally, you’re also allowed to delay your Social Security claim beyond your FRA. For each year you do, your benefits will grow 8%, up until you reach the age of 70. So if your FRA is 67, for example, you have an opportunity to boost those benefits by up to 24%.
Whether you’re planning to file for Social Security in your early 60s, mid-60s, late 60s, or age 70, be sure to learn your FRA and use it to inform your decision.
And while you’re at it, spend some time reading up on how Social Security works to put yourself in an even better position to make the right call. The program is packed with rules and nuances that can help or hurt you, depending on how you look at it, so boosting your Social Security knowledge is an important step in retirement planning.