Understanding Full Retirement Age (FRA)
Your FRA is the age at which you are entitled to 100% of your Social Security benefit (Primary Insurance Amount).
- Born 1943-1954: FRA is 66
- Born 1955-1959: FRA increases by 2 months per year
- Born 1960 or later: FRA is 67
The Cost of Claiming Early (Age 62)
If you claim at 62 and your FRA is 67, your monthly benefit is permanently reduced by 30%.
Example Impact ($2,000 FRA Benefit):
- • Claim at 62: $1,400/mo (30% Reduction)
- • Claim at 67: $2,000/mo (100% Benefit)
- • Claim at 70: $2,480/mo (24% Bonus)
When Should You Claim Early?
- Health Concerns: If your health history suggests a shorter-than-average life expectancy (e.g., before age 78).
- Financial Hardship: If you need the money to cover basic survival expenses and have no other assets.
- Investment Alpha: If you are a sophisticated investor who believes you can beat a guaranteed 8% annual increase in the market.
When Should You Delay until Age 70?
- Longevity Insurance: If you are in good health and expect to live past 85, waiting is almost always superior.
- Spousal Protection: If you are the higher-earner, your spouse may be entitled to your survivor benefit. Waiting to 70 locks in a higher "floor" for your surviving spouse.
- Still Working: If you earn significant income, claiming before FRA can trigger the "Earnings Test" penalty.
The COLA Multiplier
Social Security includes an annual Cost of Living Adjustment (COLA). Because COLA is a percentage, a larger base check (from waiting until 70) results in larger nominal increases every single year, compounding the benefit of waiting as you age.
How Benefits are Calculated
Your benefit is based on your 35 highest-earning years, adjusted for inflation. If you work fewer than 35 years, zeros are averaged in, which drastically lowers your benefit. Working an extra 2 or 3 years in your 60s can "bump out" low-earning years from your youth, significantly increasing your check.