Many older people choose to enroll in Social Security at 62, the earliest age at which you can start claiming benefits. But if you want the full monthly benefit to which you are entitled based on your personal earnings history, you will have to wait until full retirement age, or FRA, to file your claim. This year, however, a large number of seniors are at risk of registering for Social Security at the wrong time. Here’s why.
The full retirement age is increasing
FRA is not universal. Rather, it differs depending on the year of birth of an applicant.
FRA was 66 years old for anyone born between 1943 and 1954. But for those born in 1955, FRA goes to 66 and two months. If you turn 66 this year, you may be inclined to apply for benefits immediately and start collecting your money. But if you don’t get your full monthly benefit for 66 months and two months, you’ll permanently reduce that payment by registering a few months in advance.
The good news is that, in this scenario, the blow you will take on your monthly benefit won’t be that extreme. If you declare to social security a year earlier, your monthly benefit will be reduced by 6.67%. If you deposit just months in advance, you will be faced with a 1.11% discount. This means that if you are entitled to a monthly benefit of $ 1,500 from the FRA, reporting two months earlier will leave you with $ 1,483 per month instead.
Yet if you expect Social Security to be your main source of retirement income – say because you have little money in an IRA or 401 (k) plan – then reduce your monthly benefit by the same 1.11. % may not be a route you want to go down. As such, if you hit 66 this year, be careful when you actually hit FRA.
Of course, if you make end up filing for social security a bit early, there is another option to look at. You are allowed to revoke your return once in your life, so if you file at 66 instead of 66 and two months and then realize your mistake soon after the fact, you can withdraw your claim for benefits, pay back the claim. money you received. , and claim social security again later. In fact, you have up to a year to cancel your deposit if you wish. But a better bet may be to avoid this scenario in the first place by knowing your exact FRA.
Incidentally, the FRA for people born after 1955 is even later. Specifically, from this year the FRA increases by two months per year until it reaches its maximum at age 67 for people born in 1960 or later. Knowing your FRA always helps to avoid a filing error that leaves you with less Social Security income for life – and to know the rules of an overhaul, just in case you need to cancel a. fault.
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