If you’re planning to rely on Social Security during your retirement, understanding how the program works is crucial. Social Security can be complex and confusing, but one thing that could significantly impact your benefits is understanding your full retirement age (FRA). Misunderstanding this key factor could lead to a loss of $4,560 or more each year.

What is Full Retirement Age (FRA)?

Your FRA is the age at which you can claim your Social Security benefits without facing any reduction in your monthly payments. It’s the age when you receive 100% of the benefits you’ve earned based on your work history and earnings. You can file for benefits either before or after your FRA, but filing before it will reduce your monthly checks, while filing after can increase them.

In fact, many people don’t know when their FRA is. According to a 2024 survey from the Nationwide Retirement Institute, only 15% of U.S. adults know their FRA. Among adults aged 50 and above, only 16% could correctly identify their FRA. This misunderstanding often leads to costly mistakes when people file too early, assuming they’re eligible for their full benefits.

FRA by Birth Year

Your FRA depends on the year you were born. If you were born before 1960, your FRA is between 66 and 67 years old. However, many people incorrectly assume that their FRA is earlier than it really is. For instance, those aged 60 to 65 tend to believe their FRA is 64 years old, when in reality, it’s likely between 66 and 67.

The Cost of Filing Too Early

The main mistake people make is filing for benefits before their FRA. While you can start collecting Social Security as early as age 62, filing early results in a permanent reduction in your monthly payments. For every year you file before your FRA, your monthly checks will be reduced by about 6-8%.

If you file at age 62, for example, your benefits will be reduced by as much as 30%. For a typical retiree, this could mean a loss of around $380 per month, or $4,560 per year.

To illustrate, let’s say your FRA is 67 years old, and you are eligible to receive $1,900 per month when you reach this age. If you mistakenly believe your FRA is 64 and file for benefits at that age, your monthly check could drop by 20%, reducing it by $380 per month. Over the course of a year, this would amount to a loss of $4,560.

How Much Do These Reductions Matter?

While the reduction in monthly payments may seem significant, it’s important to remember that Social Security is designed to give you roughly the same total lifetime benefit, regardless of when you start collecting. If you file early, you’ll receive smaller monthly payments but more of them, which could add up over time. Conversely, if you wait until later to file, your payments will be larger, but you will receive fewer of them.

If you live an average lifespan, the total benefits you receive should be about the same, whether you file early or late. However, if you expect to live longer than average, delaying your Social Security filing can result in much larger payments over the course of your retirement. On the other hand, if you expect a shorter life expectancy, filing early might be the better choice to maximize your benefits in the short term.

Here’s how the average monthly Social Security benefits change depending on when you file:

• At age 62: $1,298
• At age 63: $1,339
• At age 64: $1,460
• At age 65: $1,563
• At age 66: $1,740
• At age 67: $1,884
• At age 68: $1,948
• At age 69: $1,945
• At age 70: $2,038

Should You File Early or Wait?

Whether you should file early or wait depends largely on your life expectancy and financial situation. If you don’t expect to live into your 80s, filing early could give you more time to enjoy your benefits. However, if you expect a longer lifespan, it might be better to delay your filing in order to receive larger monthly payments that will continue throughout your retirement.

The key takeaway is that there’s no one-size-fits-all answer when it comes to when to file for Social Security. What matters most is knowing your FRA and understanding how it affects your benefit amount. This way, you can make an informed decision that suits your financial goals and retirement plans.

The $22,924 Social Security Bonus You Might Be Missing

In addition to understanding your FRA, there are other ways to boost your Social Security benefits. Some people are unaware of strategies that could add up to $22,924 or more to their annual benefits. By learning about these lesser-known tactics, you could retire with greater financial confidence and peace of mind.

To learn more about maximizing your Social Security, explore strategies that could help you increase your benefits and ensure a more comfortable retirement.