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Social Security – How Much Do You Really Know (Part 3)?


In this Blog series, we are covering a range of topics designed to educate Americans on important details of Social Security. Today’s topics is Full Retirement Age (FRA), which is not the same thing as Qualification Date. Those terms do not apply the same way for all Americans who are already qualified for benefits, or who may qualify in the future.

Last week we discussed the importance of qualifying for eventual benefits during your working life through attaining your Qualification Date. This happens when you have paid in to the System for 40 calendar quarters, regardless of age. Full Retirement Age (FRA) ranges from age 65 to age 67, depending on your year of birth. People born before 1938 reach FRA upon their 65th birthdays. For later birth years, the FRA scale moves up in increments until birth years 1960 and later, where it reaches the maximum FRA of 67.

FRA may be amended from time to time by Congress, with Presidential approval. The last major change to FRA happened in 1983, when the Reagan Administration implemented changes designed to postpone bankruptcy of the entire Social Security System for another generation or two. Whether and when it might change again is a topic for a later discussion.

As much as it may sound strange, your “Full Benefit” is not the maximum you may receive. It is simply the amount you would receive monthly should you start claiming benefits upon attaining your FRA. Social Security rewards people for filing later than their FRA, up to age 70. The rewards are significant, as benefits increase 8% for every year of delay past FRA. Interesting fact: Increases in benefit level due to delayed filing are not computed annually, but rather monthly. Every month of delay is rewarded with an increase of 1/12 of 8% of Full Benefit.

Conversely, Social Security allows for Early Benefits, meaning filing before FRA. The earliest age to claim benefits is 62, and the claimant receives a reduced benefit of 8% for each year prior to FRA. Again, this reduction is pro-rated by month, rather than by year.

Most people understand that Social Security will reduce your monthly benefit if you are taking early benefits and earning money at the same time (“still working” reduction). Many people are unaware, however, that no reduction will take place upon attainment of FRA. Further, no benefit is ever lost, as reduced benefits are actuarially “pushed forward” into your future benefit calculation. Some people believe that delayed benefits are lost, and that is simply not true. (Note that it can take up to 15 years to regain the entirety of your reduced benefits.)

Since it is not an automatic function to receive Social Security benefits at Full Retirement Age, and since benefits are not a fixed number, Social Security claiming strategy is an integral part of Personal Financial Planning. If your financial advisor is not able to competently discuss your options, you can call the Van Wie Financial Hour on Saturday mornings starting at 10:00 a.m., or send us an email through our website, vanwiefinancial.com.

In the next few weeks, we will be covering more and more details about Social Security. Our efforts are aimed at teaching people about options existing within the System, and how to plan for their own personal “best” ways to collect.

Van Wie Financial is fee-only. For a reason.