When it comes to Social Security, what do you need to know about the full retirement age (FRA) and how it impacts your benefits? With over 20 years of personal finance and retirement planning experience as a financial consultant and CEO of Sexton Advisory Group in San Diego, CA, here are some friendly reminders I’m sharing with my clients — perhaps you’ll find these helpful as you plan for your retirement.
- What should retirees know about the full retirement age for Social Security? Social Security earnings are index-adjusted based off your top 35 years of earnings. If you work more than 35 years, the additional years will replace lower earnings years, increasing your Social Security benefit. At your Full Retirement Age (FRA) of 67 years old, you will receive your full FRA benefit; if you take Social Security earlier than your FRA, you’ll receive a percentage of your benefit.
- What impact could it have on their benefits? Taking social security early will reduce your benefits from 25% to 30%, depending on your full retirement age. For every month you delay taking your social security past your FRA, your benefit will increase two thirds of 1%, or 8% annually until age 70. Many people take their benefits early because they need the money now to keep up with living expenses or don’t expect to live long enough to profit from delaying their benefits. The downside of taking benefits early is your benefits will be permanently reduced. If you decide to go back to work after taking your benefits, it’s possible you can be penalized if you earn too much.
- Any other advice related to the full retirement age and benefits? Social security benefits will continue to pay you income for as long as you live, even if you exceed life expectancy. It isn’t affected by market conditions — whether the market is up or down, you’ll continue to receive Social Security income. It’s also adjusted for inflation; most years, Social Security income will be adjusted for inflation to keep the purchasing power of your retirement. Make sure you take the time to understand your benefits, whether it be how your social security amount is calculated, how spousal, divorced and widower benefits work, and social security disability. The decision of when and how you take your social security benefit could result in tens of thousands of dollars gained or lost over your lifetime.
