Social Security and Retirement. What does "Full Retirement Age" Mean?

An informal survey of staff at the Center for Retirement Research asking “What is the current retirement age for Social Security?” produced a range of responses. About half — mostly the “old hands” — said 67. The other half — generally younger and newer staff members — gave answers including 62, 65, 66 and 68. Essentially, they are all wrong. Social Security’s full retirement age is based on the year you were born so the fact that people are confused is not surprising.   

You can start receiving your Social Security retirement benefits as early as age 62. However, you are not entitled to full benefits until you reach your full retirement age and even then, if you actually delay taking your benefits until age 70, your benefit amount will be increased further for you. 

Why did the Full Retirement Age change? 

Full retirement age, also called "normal retirement age," was 65 for many years. In 1983, Congress passed a law to gradually raise the age because people are living longer and are generally healthier in older age. The law raised the full retirement age beginning with people born in 1938 or later. The retirement age gradually increases by a few months for every birth year, until it reaches 67 for people born in 1960 and later.   

If age 70 is the age at which Social Security pays the highest possible benefits, why do we still talk about full retirement age? 

Before the delayed retirement credit became actuarially fair, full retirement age was a meaningful concept. It was the age at which lifetime benefits were the highest. But once the delayed retirement credit became actuarially fair, full retirement age became largely meaningless. It does not describe the age when benefits are first available: That is age 62.  It does not describe the age when monthly benefits are at their maximum: That is age 70.  It really doesn’t have any meaning in terms of an official retirement age.   

But, it is important to note that a number of specific Social Security provisions are linked to the full retirement age:  An earnings test applies before the full retirement age but not thereafter, and benefits for widows and spouses are reduced if claimed before the full retirement age and not thereafter.  

These provisions are relatively small however and do not undermine the basic fact that 70 is the age that your full, maximum monthly benefits become available under Social Security. 

So, how do I decide when to start taking my benefits?  

There is no right or wrong answer to this; it truly does depend on the individual. You want to think about life expectancy, health, and other income sources when making up your mind.   

There are other options one can consider if they are in need of a retirement paycheck but do not want to start pulling from their social security benefits until later.  For example, some opt to start taking from their 401k as a source of income, or they look to other income sources, such as pensions or annuities. One option, called a Fixed Index Annuity (FIA), allows the consumer to obtain a reasonable rate of return over time, while shielding them from losses when the market is down. Most FIAs also allow for a penalty-free 10% withdrawal per year, which therefore makes for a potential source of income you can pull from instead of turning social security benefits on too soon. 

At Summerlin Benefits Consulting, we specialize in helping our clients preserve and grow their nest eggs so that they can focus on enjoying their retirement instead of worrying about their means. We also help our clients consider ALL of their retirement income options, including social security benefits, so that they can make the best decision for themselves.  One of our core values is educating our clients and making things simple to understand so that they feel empowered to choose the path that is right for them!