If you are approaching retirement and considering claiming your standard Social Security benefits, there are a few things you should know ahead of time. One thing that’s important to understand is your full retirement age. If you’re wondering if you are ready to retire, to begin with, check out this article.

What is Full Retirement Age?

Full retirement age, or FRA, is the age you must reach before claiming your standard Social Security benefit or your primary insurance amount (PIA). The PIA is the amount you can expect to be given based on your inflation-adjusted average wages earned. These are the wages you have earned throughout your working career.

When Are You Full Retirement Age?

Full retirement age for those born in 1954 is 66 and 67 for those born in 1960 or later. The important thing to understand is that it varies based on the year you were born.

Why is Full Retirement Age Important?

The reason it is important to know all of this is because it affects when you can claim your Social Security without reducing your benefits. You can earn delayed retirement credits which raise your benefits. It also determines how much you can make while working without forfeiting your benefits.

How Does This Affect Your Benefits?

In order to receive the standard Social Security benefit amount, you must wait until you hit your full retirement age. If you choose to claim your Social Security before your FRA, you will be subject to early withdrawal penalties that reduce your benefit by the following, according to Social Security Online:

• 5/9 of 1% for each of the first 36 months before the normal age of retirement
• 5/12 of 1% for each subsequent month before the normal age of retirement 

This amounts to a reduction of 6.7% for each of the first 3 years. Additionally, there will be a reduction of 5% for each following year before your FRA. So, for example, if you choose to accept your benefits at 62 when your FRA is 67, you will receive a 30% reduction in overall benefits.

What Are Delayed Retirement Credits?

In comparison, should you accept benefits after your FRA, you receive a delayed retirement credit. This credit is valued as ⅔ of 1% per month, resulting in an 8% annual increase to your monthly benefit. You can earn delayed retirement credits for 3 years, between 67-70, after which there is no benefit in continuing your delay. 

Can You Work After FRA?

Yes. You can work after your FRA without affecting your Social Security benefits.

How Much Can I Earn?

Should you choose to continue working after FRA, you can work and earn as much as you like. However, if you work before your FRA, you may sacrifice your benefits if you earn more than the annual threshold. If this happens, your benefit amount will be recalculated at FRA to account for those changes.

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Confident Living is a continuing care at home membership program, focused on helping you remain active and independent as you age in your own home. We serve the greater Cincinnati area. For more information, contact us online or call (513) 719-3522.