What is “full retirement age” for Social Security benefits and how is your benefit calculated? Robert Canavan, CFP® from Pure Financial explains.
Today we’re going to talk about Social Security and what is known as your full retirement age. This is the actual age when you’ll get your full retirement benefits from Social Security. And it actually varies depending on the year when you were born. For most of you, full retirement age or FRA will be somewhere between the ages of 66 but no more than 67. Social Security is not needs-based, it’s actually earnings-based, and the Social Security Administration tracks what you paid into the program and then it figures out what you’re going to get.
So you need 40 quarters to be eligible for Social Security, and you can earn up to four quarters in a year. So you need at least 10 working years to receive a benefit. Then what they do is they take your 35 highest-earning years and those are indexed to arrive at what is called your primary insurance amount or PIA. This is what you’ll actually receive on what is known as your full retirement age date.
Social Security can be turned on any time between the ages of 62 and no later than 70. If you turn it on early, you do so at a discount. And if you delay it past your full retirement age, your PIA will actually grow at approximately 8 percent annually. So when you take Social Security’s going to be one of the biggest decisions you may make in retirement.
I hope this helps steer you in the right direction. If you want to come in further and discuss planning and the optimal Social Security strategies, please reach out to us here at Pure Financial. My name’s Robert Canavan, CERTIFIED FINANCIAL PLANNER™.