Summary:
1. Claiming Social Security benefits is a crucial step in retirement planning, but many people are unaware of their full retirement age.
2. Knowing your full retirement age is essential as it determines the amount of benefits you will receive.
3. Deciding when to claim Social Security benefits can impact your monthly income in retirement, so it’s important to consider your unique financial situation and goals.
Article:
Retiring is an exciting milestone, especially when you’re ready to claim your Social Security benefits. However, it’s crucial to ensure you’ve planned adequately for this significant step in your retirement journey. One common misconception that affects nearly 80% of U.S. adults is not knowing their full retirement age (FRA). Your FRA is the age at which you’ll receive 100% of the benefits you’ve earned based on your work history. Surprisingly, only 21% of U.S. adults can correctly identify their FRA, according to a survey by the Nationwide Retirement Institute.
Not knowing your FRA can have a lasting impact on your monthly benefit payments. For example, the average baby boomer believes their FRA is 66 years old, while Gen Xers estimate it at 65. However, for those born in 1960 or later, the FRA is actually age 67. This difference may seem small, but it can affect the amount of benefits you receive. Claiming benefits before your FRA will result in permanent reductions, with a 6.7% deduction for each year claimed early. This reduction can lead to smaller monthly payments for the rest of your life.
When deciding the best age to claim Social Security benefits, it’s essential to consider your financial situation and retirement goals. Filing early can be beneficial if you have ample savings and want to start retirement early. On the other hand, delaying benefits can increase your monthly income significantly, with a potential bonus of up to 32% if you wait until age 70 to claim. Understanding your FRA can help you make informed decisions about when to claim benefits, ensuring a more financially secure retirement. By weighing your unique circumstances and objectives, you can determine the optimal filing age for your Social Security benefits.
