The Social Security Administration (SSA) is a federal agency responsible for distributing benefit payments to millions of Americans each month, including retirees and individuals with disabilities. The welfare program is primarily funded through the taxes of the current workforce.
In order to qualify for this program, particularly retirees, certain age requirements must be met. Senior citizens can begin claiming Social Security benefits from age 62, however, there are some caveats to claiming from this age. This is because the SSA has a Full Retirement Age which differs slightly to the generally accepted age of retirement for Americans. As such, claiming earlier than your Full Retirement Age will result in a lower monthly benefit amount.
Conversely, if a retiree holds off on claiming until they are 70, which is well beyond the Full Retirement Age, they will be able to reap an even larger benefit sum each month.
Social Security Full Retirement Age
Whilst the generally accepted retirement age for most American seniors is around the age of 62, it is not the Full Retirement Age at which a beneficiary can begin collecting the full benefit amount they are entitled to. The benefit amount a beneficiary of Social Security receives is determined in relation to the number of years that they had worked and how much they had earned and paid in taxes during that time.
As such, if a retiree opts to begin claiming benefits from the SSA from the age of 62, each month, their benefit will face a small reduction until they reach the age of their Full Retirement Age. A retiree’s Full Retirement Age may differ from person to person as it is based on the year in which they were born.
Here are some figures highlighting the difference in benefit amounts between a retiree who claims early and one who waits until age 70 to claim:
These examples are using a $1,000 monthly benefit at Full Retirement Age as its point of reference.
- Seniors with a year of birth from 1943 to 1954 will have a Full Retirement Age of 66. There will be 48 months between the age of 62 and the Full Retirement Age. By claiming from 62, the $1,00 benefit would be reduced by 25% to $750. A spouse’s $500 benefit would be reduced by 30% to $350.
- Seniors with a year of birth of 1956 will have a Full Retirement Age of 66 and 4 months. There will be 52 months between the age of 62 and the Full Retirement Age. By claiming from 62, the $1,00 benefit would be reduced by 26.67% to $733. A spouse’s $500 benefit would be reduced by 31.67% to $341.
- Seniors with a year of birth of 1959 will have a Full Retirement Age of 66 and 10 months. There will be 58 months between the age of 62 and the Full Retirement Age. By claiming from 62, the $1,00 benefit would be reduced by 29.17% to $708. A spouse’s $500 benefit would be reduced by 34.17% to $329.
- Seniors with a year of birth of 1960 and later will have a Full Retirement Age of 67. There will be 60 months between the age of 62 and the Full Retirement Age. By claiming from 62, the $1,00 benefit would be reduced by 30.00% to $700. A spouse’s $500 benefit would be reduced by 35.00% to $325.
A more detailed breakdown of these figures can be found on the official SSA website.
Important points to take note of before making your decision
- Those with a birthdate of January 1st should refer to the previous year when determining their FRA.
- A retiree must have been at least 62 for the entire month to qualify to receive benefits.
- Those born on the 1st of the month are regarded as having had their birthday in the previous month.
- The aforementioned percentages are rounded making them an approximation.
- A spouse’s maximum benefit is 50% of the benefit the worker would receive at FRA. The percentage reduction for the spouse had been applied after the automatic 50% reduction.
- If opting to delay receiving benefits until after turning 65, the SSA suggests that you “still apply for Medicare benefits within 3 months of your 65th birthday. If you wait longer, your Medicare medical insurance (Part B) and prescription drug coverage (Part D) may cost you more money.”