Here’s What to Look For
Karen Damato from Money
Jan 05, 2017
If you will celebrate your 62nd birthday in 2017 or soon after, you’re in the vanguard of a big change in Social Security: Starting with people hitting that milestone in January, the full retirement age (FRA)—that is, when you can collect your entire earned benefit—will creep up from 66 to 67 in two-month increments over the next six years.
You’ll still be able to begin your Social Security payments as young as 62. And, like now, you’ll be assured of getting a larger check for each month you delay up to age 70. But here’s the rub when the FRA goes up: “At every age along the line you are receiving a smaller benefit” than you would have before, assuming the same work record, says Jim Blankenship, a financial planner and author in New Berlin, Ill.
Surprised? That’s not the only unexpected math you may encounter when you’re deciding when to claim Social Security, whether you should work longer, and whether you would benefit from a retirement job. To make the smartest decisions, here’s what you need to know about the tricky math of Social Security.
Waiting Until Age 70 to Claim Now Means a Smaller Bonus
From the perspective of a future retiree, the increase in the full retirement age is a benefit cut, as you can see below.
Notes: FRA is 66 for people born between 1943 and 1954 and then creeps up in two-month increments, reaching 67 for those born in 1960 or later. Sources: MONEY calculations using Social Security online tools
Say you want to start collecting at age 65. That is 12 months early if your FRA is 66, but 24 months early if your FRA is 67, meaning you take a bigger haircut. With an FRA of 66, you can get 75% of your full benefit if you begin at 62; with an FRA of 67, that portion drops to 70%. Similarly, if you claim at age 70, you’ll get 124% of your benefit when the FRA is 67, vs. 132% before.