Since I started researching for my book, Retirement Basics, I find myself in many conversations on the topic. Earlier in the year I sat next to Fred from Indiana at dinner. He told me he was waiting patiently to reach age 65 so that he could apply for Social Security.
I didn’t want to burst his bubble but thought he should know that in 1983 a law was passed changing the Full Retirement Age. For those born between 1943 and 1954, Full Retirement Age (FRA) is 66. For those born 1960 or later, FRA is 67. For those born in between, the age varies between 66 and 67. I was born in 1956, and my Full Retirement Age is 66 years and 4 months. Follow the link above to determine your FRA.
Why does it matter? Your Full Retirement Age is the age when you can apply for what is considered your full benefit amount. Should you apply before, your benefit is reduced. Should you apply after, your benefit is increased.
You can start collecting Social Security benefits at age 62, but your benefit will be decreased about 30% for the rest of your life. For each year you wait, your payment will be more.
This summer while getting a haircut from my friend Susan, she mentioned that she had applied for Social Security. She had reached Full Retirement Age, and as she understood it, she would receive her maximum benefit amount. But this is not true.
If you delay receiving benefits after your Full Retirement Age, you get what are called Delayed Retirement Credits. For each year you wait to begin collecting you receive an 8% increase in benefits. This is until you turn age 70. After that there is no benefit to waiting.
I am finding that misunderstandings abound when it comes to Social Security benefits. Mistakes can be costly, and they are long term. My purpose in writing this blog is to share information that may make it easier so that future retirees can make educated choices and determine what is in their best interest.