Full retirement age or FRA is the age at which a person becomes eligible to receive his or her full Social Security retirement benefit in the United States. FRA differs based on the year of birth and has been adjusted over time because of improvements in life expectancy and budgetary considerations of the Social Security program. Knowing FRA can assist with beneficial retirement planning.
How is Full Retirement Age determined?
The Social Security Administration (SSA) determines FRA based on an individual’s birth year. When Social Security originally came into effect in 1935, the FRA was set at 65 for everyone. In the 1983 amendments, the FRA was raised gradually to account for rising life expectancy and to help ensure the program’s financial well-being128.
For individuals who were born on or after 1960, FRA is age 67.
Why was the Full Retirement Age altered?
Full Retirement Age was altered because of various reasons:
- Life span increased: Life expectancy of Americans increased, and therefore the retirees are enjoying benefits for a longer duration of time. Increasing FRA brings the benefit costs in line with the extended life span.
- Social Security sustainability: The gradual rise in FRA was among an overall endeavor to render Social Security financially solvent for generations ahead.
Claiming benefits earlier or later than Full Retirement Age
Although FRA is the point where individuals qualify to receive their full Social Security benefit, claimants have options to receive sooner or later. The options strongly impact monthly payment amounts.
Early retirement
Individuals can start taking benefits as early as age 62, but this reduces monthly payments permanently.
For example, an individual with an FRA of 67 who begins receiving benefits at age 62 will only get around 70% of their maximum benefit.
The percentage cut depends on how many months before FRA benefits are received.
Delayed retirement
Waiting past FRA to claim benefits boosts monthly benefits. For each month an individual waits to file after his or her FRA (up to age 70), his or her benefit payment rises permanently.
Delayed retirement credits will boost monthly benefits by as much as 32% over claiming at FRA.
How Full Retirement Age affects Benefit calculations
The SSA calculates Social Security benefits according to a formula based on a person’s primary insurance benefit (PIB), his or her average indexed earnings during his or her best 35 years. Timing has the following implications:
At FRA
- Beneficiaries receive their full PIB unadjusted for cuts or increases.
Before FRA
- Benefits decrease incrementally with each month advanced prior to FRA.
After FRA
- Benefits increase incrementally for each month deferred until age 70.
Knowing your FRA is the beginning to making the right decisions regarding retirement timing and claiming Social Security benefits. Take the following variables into consideration:
- Financial needs: If you require income at retirement, claiming benefits early may be unavoidable even with decreased benefits.
- Longevity variables: If you expect to live longer than average, delaying benefits may optimize life payments.
- Work: Working beyond your FRA may enable you to delay benefits while topping up your retirement nest egg.
Key takeaways regarding Full Retirement Age
The full retirement age is between 65 and 67, varying by birth year.
- Taking benefits earlier than your FRA triggers permanent decreases, whereas postponing after your FRA raises monthly payments.
- FRA changes account for increased life spans and attempts to keep Social Security afloat financially.
- Careful planning with your FRA can maximize your retirement income according to individual factors such as health, financial situation, and work status.
Full retirement age plays a crucial role in Social Security benefits eligibility and benefits computation. Regardless of whether you start early, at your FRA, or postpone, knowing how each option affects your monthly retirement benefit for proper planning of your retirement is crucial. Based on longevity, cost considerations, and working status, you can make informed decisions suitable to your perception of a comfortable retirement.
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