We are going to discuss why full retirement age is not necessarily your full social security benefit. Many people commonly misunderstand FRA or full retirement age to mean that's the best time to take social security, or it's the time where you're going to get the most social security. So, if you thought that full retirement age was the best time to get social security or the way to get the most social security you are wrong. And before we really dig into an example to explain why this is the case, it's important to understand how the federal government, the social security administration actually determines your full retirement age.

  Your full retirement age is determined by your year of birth. So as an example, if you were born in 1957, your full retirement age is 66 and six months, but in order to keep the math easy for today, we are going to actually use age 66 as full retirement age.

So, let's take a look at a social security filing timeline. The earliest that you can file for social security is age 62, the latest that you can file for social security is age 70, and somewhere kind of floating in the middle is full retirement age. Since it is a government calculation, it's not exactly in the middle and we can see that it gets more complicated depending on your year of birth; but in this example, you can see that your full retirement age benefit is $2,800 per month. That's also called your PIA. Your PIA is the primary insurance amount or the amount you're going to get each month at full retirement age. It is from that amount, in this example, $2,800 per month, that your benefit is either reduced if you take your benefit early or enhanced, if you take your benefit later. Let's take a look at how that's calculated.

If your PIA is $2,800 and you choose to take your social security at the earliest filing opportunity, which is age 62, you're going to receive 75% of your PIA or $2,100 per month. And you can see that each year you delay, you're going to get a slightly higher amount of social security. So, for example, if you wait until 65, you're going to get 93.3% of your PIA or $2,612 in this example. 

Now let's talk about what happens if you delay taking social security past full retirement age. Well, what we see is each year you get an 8% simple interest increase in that primary insurance amount. So, at age 67, you're going to get 108% of 2,800 in this example, or 3020 $4. If you wait until age 70 to file, you could receive over $3,600 in monthly social security benefits. So, what this timeline shows you is that full retirement age is by no means an indication of the best time to take social security, nor is it the time where you're going to get the most social security in order to calculate the best time to take social security requires knowledge of many other factors, such as: what tax bracket are you in? What are your other sources of income? What expenses do you have? There are a lot of things that go into it, but why do we want to understand FRA? 

Well, this concept is important to maximizing social security. Number one, if you thought FRA was the most you could get from social security now you know that's not the case. Next, understanding this timeline can help you evaluate other social security filing strategies, such as spousal benefits. In addition, it can help you understand the impact of what happens if you work at the same time that you're taking social security benefits. 

So please like this video and subscribe to our channel, to stay informed about other important social security and tax information that are going to be very relevant to your retirement planning. I hope that this was very concise and answered your question on what full retirement age is. If you'd like to schedule a brief call to talk about your questions regarding social security, you can simply click on the schedule, a call button, and that gives you direct access to my calendar so that you can schedule a time to get your questions on the table. And I would love to hear from you. I hope everybody has a fantastic day. Take care.

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