Your Full Retirement Age (FRA) is the age when the government states that you should retire. In 2012, you are FRA at 66. Here is the basic concept: the longer you wait to collect, the more you get each month. And once you collect, your decision is forever.
You have three choices when to collect your check: Early, Full, or Delayed.
You can retire at 50 if you want to, but the earliest you can collect SS is 62. And your benefit will be reduced- permanently- if you collect early. Specifically, your monthly check will be reduced by approximately .5% for each month that you collect prior to your FRA.
If you collect at 62, you will get 75% of your full benefit.*
The government defines the age that you ‘should’ retire, and it’s known as your Full Retirement Age (FRA). Once you attain that age- for most baby boomers it’s 66- you can collect 100% of the benefit you have earned.
Delay past 66
Each year that you can delay taking your benefits beyond FRA, your monthly check will increase by 8%. That means that if you can wait until 70, you get 132% of the benefit. That’s an increase of 8% per year. Not a bad investment! Also, the amount of your check will stop increasing when you turn 70 so if you haven’t started to collect at 70, you are actually losing out.
Delay past FRA= Government guaranteed 8% annual increase to age 70
A quick example:
Assume FRA is 66, and you will be entitled to $1000/mo at FRA.
- At 62 you will get $750/month.
- At 66 you will get $1000/month.
- At 70 you will get $1320/month.
So, should you collect early or wait? Now we have the numbers to do the math, but there is still a bit more to figure out. Next week we’ll discuss how your plans to work past 62 play a role in your decision.
Get your numbers right now: Social Security Administration Estimator
You can estimate several different ages side-by-side. You will need to enter some personal info, including your SS#, but don’t worry- the system doesn’t store your information.