As we move toward the new year, now is a good time to review your retirement planning, particularly in terms of Social Security. Many still think of 65 as the age when they can retire and begin receiving Social Security benefits. But that is no longer the case, as rules have changed over time. More important than ever, you need to understand how your “full retirement age” affects your benefits.
The Changing Full Retirement Age
The “full retirement age” for Social Security was 65 years of age for many years. Congress voted to gradually raise that in 1983 to coincide with increased life expectancies and health span into one’s old age. If you were born after the year 1960, then the full retirement age is now 67 years old. What this means is you must wait until age 67 to begin drawing on all of your Social Security funds.
This is essential as it affects how much you would receive monthly. If you file before reaching full retirement age, you will have fewer monthly benefits. Conversely, when you wait past full retirement age, you increase the amount you get each month.
When Can You Collect Social Security?
You can start drawing Social Security at age 62, but it is important to know that the earlier you start taking Social Security, the less you will get every month. So, if you draw it at 62, you will be receiving a lower amount compared to when you take it at your FRA. As a matter of fact, every year that you postpone after your FRA, you may be able to receive an additional 8 percent in monthly benefits per year up to age 70.
So, if you file at 62, your checks will be less than if you wait till age 70. The more years you wait, the bigger your monthly check will be. For example, for someone retiring in 2024, if they begin taking checks at 62, their maximum monthly check will be $2,710. On the other hand, waiting until age 70 means that the same person might be able to get $4,873 a month — a difference of over $2,100.
Social Security and Working Before Retirement
You can work and earn retirement benefits, but your earnings can reduce your Social Security benefits before you reach full retirement age. In 2024, if you earn above $22,320 you will lose a part of your Social Security benefit check.
Once you reach your full retirement age, however, Social Security will recalculate your benefits and give you credit for the months you did not receive benefits because you were working. This means you would not lose that money forever.
Social Security and Inflation: What You Can Expect in 2025
To keep pace with the rising cost of living, Social Security benefits are annually adjusted for inflation, known as the Cost of Living Adjustment (COLA). For 2025, this means a 2.5% increase in Social Security benefits, or an average increase of $50 in the monthly benefit, from $1,927 to $1,976. Retired couples who receive benefits will see an average increase of $75, bringing their monthly total to an estimated $3,089.
The full retirement age: it seems like just a number, but it is what determines the amount you get from Social Security. If you start drawing benefits before your FRA, you will be taking the reduced amount for the rest of your life.
The closer you can get to your FRA-or even wait until age 70-the more you will receive. It is a personal decision, but the extra monthly benefit from delaying can be worth it, especially if you plan to rely on Social Security as a primary income source during retirement.
When to Claim Social Security
When to claim the benefits is also one of those considerations that one should make as a result of many considerations, such as health conditions, life expectancy, jobs, and other retirement plans.
For example, for one in poor health, the benefits would be worth claiming earlier, but for someone in great health who can afford the waiting time, delaying this will lead to a higher benefit.
It is also worth noting that once you choose to start receiving Social Security, that decision is permanent. Suppose you take the benefit early, with a reduced amount; that lower amount remains in place for the rest of your life. If you wait until your full retirement age or later, you will get the full benefits you are eligible for, plus increases for delaying until age 70.
Conclusion
This is not a one-size-fits-all situation when it comes to claiming Social Security benefits. There are many factors involved, such as your financial situation, health, and retirement plans. Knowing the full retirement age and how waiting to claim benefits can increase your monthly check is essential for maximizing this important program.
If you are planning to retire, then it is best to give yourself time to evaluate your choices, consult with a financial advisor, and consider everything that will determine your final decision. The sooner you start planning, the better control you will have over your retirement and your Social Security benefits.