Table of Contents
Key Takeaways
- Full retirement age (FRA) determines when you can receive full Social Security benefits, and it varies based on your birth year.
- Claiming benefits before FRA leads to permanent reductions in monthly payments, while delaying until age 70 increases payments.
- If you work while collecting benefits before FRA, there are earning limits that affect your payments, but no limits after reaching FRA.
As you plan for retirement, you'll likely have several questions about finances. Starting that early will reduce your Social Security monthly payments for the rest of your life because you'll receive more payments over time.
Instead of just knowing when you're allowed to collect Social Security benefits, it's important to determine the timing that's right for your unique situation.
Know Your Full Retirement Age
A good starting point is to know your full retirement age, which is the age at which you can begin receiving full retirement benefits. Keep in mind that you can delay claiming Social Security benefits; the longer you wait, the higher each monthly benefit payment will be. When you turn 70, there is no further increase to your monthly payments.
Your full retirement age will depend on what year you were born. If you were born between 1943 and 1954, your full retirement age is 66. People born in 1944 or later have different retirement ages. Anyone born in 1960 or after has a full retirement age of 67.
Here's the breakdown for each year of birth, according to the Social Security Administration:1
A general rule of thumb is that, for each year you claim your Social Security benefits before full retirement age, your monthly payments are reduced by about 8%. And for each year you delay until age 70, your monthly payments increase by about 8%.
According to Social Security, each month before full retirement age that you begin claiming social security benefits, the amount is reduced by 5/9 of one percent up to 36 months. Beyond 36 months early, you would further reduce your monthly payments by an additional 5/12 of one percent per month.
The Cost of Claiming Social Security Benefits Early
Social Security gives the example of a claimant whose benefits would be $1,000 a month at the full retirement age of 66 and 8 months. If that individual begins claiming benefits at age 62, his or her monthly payments would be reduced to $716.
That decrease is a permanent reduction of monthly benefits. In this case, it will not increase to $1,000 when the individual reaches their full retirement age.
On the other hand, if that person waited until age 70 to begin claiming benefits, the monthly payments would be $1,266 moving forward.
If you want to know specifically how your payments would be affected by claiming benefits at different ages, you can create a my Social Security account and get personalized estimates based on your actual earnings.2
How Your Full Retirement Age Affects Your Additional Wages
Full retirement age also becomes a consideration if you plan to continue working after you start claiming your Social Security benefits.
If you are collecting Social Security retirement benefits before your full retirement age, there is a limit on how much you can earn without losing a portion of your benefits. For 2024, that limit is $22,320.3
If you earn more than that and are collecting Social Security before your full retirement age, the government deducts $1 from your benefit payments for every $2 you earn above the annual limit. The year you reach full retirement age, the government deducts $1 from your benefits for every $3 you earn above a higher limit — which was set at $59,520 as of 2024.
Once you reach full retirement age, your earnings will no longer reduce your benefits, and there is no limit on additional earnings. In addition, your Social Security benefit will be recalculated to give you credit for the months your benefits were reduced because of excess earnings.
How to Decide When You Should Start Claiming Social Security Benefits
When to collect is a personal decision. You'll likely want to consider your health, your finances and whether you want to keep working.
- If you are in poor health, it might make sense to begin claiming benefits earlier. The longer you live, the more monthly payments you can expect to receive, and the shorter your life, the fewer monthly payments you can expect.
- If you're in great health and have enough savings to live on if you wait, it might make sense to delay claiming benefits.
The Bottom Line
It might help to review your finances with a financial professional to decide the best approach for your circumstances. It's wise to ensure you have all the information you need before making a decision that will affect how you live out your golden years.
Sources
- Starting Your Retirement Benefits Early. https://www.ssa.gov/benefits/retirement/planner/agereduction.html.
- My Social Security. https://www.ssa.gov/myaccount/.
- Receiving Benefits While Working. https://www.ssa.gov/benefits/retirement/planner/whileworking.html.
