“We can never insure one-hundred percent of the hazards and vicissitudes of life. But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.” —Franklin D. Roosevelt
Over the last few weeks we have been providing you with definitions and information on the language, jargon and rules used by the Social Security Administration as they administer retirement benefits. If some of this has sounded alien to you, don’t despair. Hang in there with me. I was perplexed and disoriented at first as well. Retirement credits, PIA, spousal benefits, AIME, covered compensation and bend points are all part of the nomenclature developed by the Social Security Administration to explain the structure’s interworking. However, a little preparation will arm you with an understanding and an intelligence to traverse the ins and outs of filing benefits in order to maximize the value financially.
Today we will tackle the notion of Full Retirement Age or FRA. You may also see the term Normal Retirement Age. Both are referring to the same concept. To me there is no such thing as a “normal” retirement, so I prefer to use the term Full Retirement Age. FRA is an important concept to understand since it is the age at which you are entitled to full or unreduced retirement benefits. Receiving your Social Security retirement income before this age will create a permanent reduction in your benefit and delaying the benefits beyond your FRA increases the amount you will receive.
Your FRA is based on your year of birth. Below is a chart outlining how this works.
|Year of Birth
|Full Retirement Age
|1938||65 & 2 months|
|1939||65 & 4 months|
|1940||65 & 6 months|
|1941||65 & 8 months|
|1942||65 & 10 months|
|1955||66 & 2 months|
|1956||66 & 4 months|
|1957||66 & 6 months|
|1958||66 & 8 months|
|1959||66 & 10 months|
|1960 & later||67|
Again, the idea of FRA is important since starting your retirement benefits before your FRA permanently reduces the amount. For example, if your FRA is 66 and you begin receiving your Social Security retirement benefits at age 62, your benefit will be reduced by 25%. Wait until age 63 and your benefits are reduced by 20%. The longer you wait, the greater your benefit for life. If you delay receiving benefits after your FRA, your benefits are increased by 8% annually. I covered this topic in an earlier blog with greater detail.
Today our current retirement scheme offers opportunities for retirees to choose their age of retirement. But our modern-day system also requires workers to be aware of their available benefits and to take responsibility for making the right choices throughout their working life and at retirement, particularly when it comes to filing for Social Security retirement benefits. The Social Security Administration employees will not provide you with advice. Their role is to answer technical questions, to the best of their training and experience, on how the system works (as you’ve seen this stuff is complicated) and assist you with filling out the paperwork.
Since the Social Security Administration, in an effort to cut expenses, stopped sending staff out to conduct informational seminars the financial planning community has stepped up and filled that gap. And, as more of their clients are choosing to retire, I have seen this group of professionals dig in and learn these complicated rules in order to support them through the decision-making process. Many have purchased analytical software designed to assist with the pursuit of the best time to file by creating various “what if” scenarios. I would encourage you to reach out to your financial planner for the benefit of his or her wisdom and experience.
And before you finalize the paperwork, keep this thought in mind:
“Planning to retire? Before you do, find your passion; do the thing that you have always wanted to do.”
Enjoy your journey!
Gary A. Weuve, CFP®
Founder and CEO
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