Social Security is a complex topic, and if you're confused about how the system works you're not alone. A whopping 88% of Americans age 50 and over say they don't know what factors influence how much they'll receive in benefits according to a 2018 survey from the Nationwide Retirement Institute, and only one in three people knows what their full retirement age is.
That can be a problem when so many people depend so much on Social Security benefits -- for 21% of married couples and 44% of unmarried beneficiaries, Social Security benefits make up at least 90% of their income according to the Social Security Administration. In other words, many people are relying on their benefits just to make ends meet during retirement, yet they don't fully understand where that money is coming from and how they could be maximizing their monthly checks.
If there's just one term to understand in regards to your benefits, it's your full retirement age (FRA). Your FRA impacts how much you'll receive each month, so it's best to have a solid understanding of how it works if you want to maximize your benefits.
What is your full retirement age?
In a nutshell, your FRA is the age at which you'll receive 100% of the benefits you're theoretically entitled to. It's determined by the Social Security Administration; your exact FRA is dependent upon the year you were born:
Year You Were Born
Full Retirement Age
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 or later
Source: Social Security Administration
The amount you're entitled to when you reach your FRA is calculated by the Social Security Administration based on the 35 years over your career that you earned the most. There are complex calculations involved, but after some math magic the Social Security Administration whips up a number to show how much you'll receive if you claim your benefits when you reach your FRA. (For an estimate of how much you're entitled to, you can use the benefits calculator on the Social Security Administration's website.)
That number, though, only tells half the story. Specifically, it tells you how much you'll receive if you wait until your FRA to claim -- but if you claim before or after that age, your benefits amount will be affected.
How age affects your monthly checks
You can start claiming Social Security at any point between ages 62 and 70. If you claim at 62 , though, your benefits will be reduced (the exact amount will depend on your FRA). If your FRA is 67, for example, and you claim at 62, you'll receive a 30% reduction in benefits -- for life. If your FRA is 66, your benefits will be reduced by 25%. For FRAs between 66 and 67, your checks will be reduced somewhere between 25% and 30% if you claim at 62.
On the other hand, you can also delay benefits until after you reach your FRA, up to age 70. For every month you delay past your FRA, you'll receive a boost in benefits. And if you wait until age 70, you'll receive an increase in benefits of between 24% and 32% (on top of the full amount you're entitled to), depending on your FRA.
The system is designed so that, in theory, you'll receive the same lifetime benefits regardless of when you claim. If you claim early, you'll receive more (but smaller) checks, and if you claim later, you'll receive fewer (but bigger) checks. In a perfect world, it wouldn't matter when you claimed, because you would know that you'd receive the same amount of money over a lifetime no matter what age you claimed.
However, it's not a perfect world, and the math doesn't always work out so nicely. That means you may end up with more or less in total benefits depending on when you claim, so it is important to be strategic about it if you want to maximize your benefits.
Social Security benefits in action
To see exactly how the age at which you claim can affect your lifetime benefits, let's look at a hypothetical example.
Say you were born in 1970, making your FRA 67 years old, and the amount you're theoretically entitled to if you claim at that age is $1,400 per month (or $16,800 per year). If you claimed benefits at age 62 they would be cut by 30%, leaving you with $980 per month ($11,760 per year). Wait until age 70, though, and you'll receive a 24% boost on top of the full $1,400 you're entitled to, so your total monthly check would amount to $1,736 ($20,832 per year). Here's what your lifetime benefits would look like over time depending on whether you claimed at 62, 67, or 70:
Total Lifetime Benefits When Claiming at 62
Total Lifetime Benefits When Claiming at 67
Total Lifetime Benefits When Claiming at 70
Source: Author's calculations
Does this mean it's always best to claim at age 70 because you'll receive the most money over time? Not necessarily. If you only live until, say, age 75, you'll only have five years to enjoy those benefits, and you'll have received around $50,000 less overall than you would have if you'd claimed at 62. However, if you expect to live well into your 80s or 90s, it is a good idea to delay claiming benefits until age 70, because you will receive more over time.
It's also important to keep in mind that you don't necessarily need to retire and claim benefits at the same time. For example, you may choose to retire at 62 but delay claiming benefits until age 70 to get those bigger checks for the rest of your life.
Deciding when to claim benefits is a personal decision that ultimately depends on your unique situation, and there's no real right or wrong answer. But the best place to start is to figure out your FRA, because once you know that you're on your way to making a strategic decision to make the most of your benefits.
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