Eligibility for Social Security benefits in retirement is based on whether you have earned at least 40 “credits” in your career. You can earn up to a maximum of four credits each year, so it would take someone 10 years to fully qualify for Social Security benefits.
The minimum age to start claiming your Social Security benefits is age 62. If you are turning 62 and need the income from Social Security to support yourself, you can start receiving benefits. However, if you do not need the income and can afford to delay your benefits until full retirement age – it might be most beneficial. This is because claiming benefits before full retirement age can cause a reduction in benefits received.
Full retirement age, or FRA, is the age at which you must reach before claiming your standard Social Security benefit or your primary insurance amount (PIA). PIA is the amount you can expect to be given based on your inflation-adjusted average wages earned. These are the wages you have earned throughout your working career.
For those born after 1943 but before 1954, your FRA is age 66. For those born between 1955 and 1960, the FRA starts at 66 years and two months, and increases by two months each birth year to 1960. For those born in 1960 or later, the full retirement age is 67.
It is important to know your FRA because it affects when you can claim Social Security without reducing your benefits. It also determines how much you can make while working without forfeiting your benefits.
If you want to receive the standard Social Security benefit, you must wait until you reach your FRA. If you choose to claim your Social Security before your FRA, you will be subject to early withdrawal penalties that reduce your benefit. For example, if you choose to start receiving your benefits at age 62 and your FRA is age 67 this would amount to a reduction in benefits of 6.7% for each of the first 3 years and a reduction of 5% for each following year. This would result in a 30% overall reduction in benefits!
In comparison to the above example, should you accept benefits after your FRA, you receive a delayed retirement credit. This credit is valued as ⅔ of 1% per month, resulting in an 8% annual increase to your monthly benefit. You can earn delayed retirement credits for 3 years, between 67-70, after which there is no benefit in continuing your delay.
Yes. You can work after your FRA without affecting your Social Security benefits.
You can choose to continue working after reaching your FRA and earn as much as you like. However, if you begin receiving your benefits before reaching your FRA and continue to work, you may lose some benefits if you earn more than the annual threshold. If this happens, your benefit amount will be recalculated at FRA to account for those changes.
Yes! We would be glad to help you in this decision! If you have any questions, please feel free to reach out to MMBB’s Financial Planning team to help you navigate through these tough decisions.
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