What Impact Does Your FRA Have on Social Security Benefits?

Reaching full retirement age, also known as your FRA, does influence your Social Security benefits throughout retirement. However, there seems to be some misinformation circulating, as though reaching this cornerstone causes your benefits to increase. Although this may happen for select individuals, it isn’t an average occurrence all retirees alike should come to expect. So, let’s delve deeper into who might expect a boost in benefits with time and why it happens.

Learning about the FRA assigned to your birth year can help you better understand how it affects your benefits. Depending on your birth year, the government appoints a full retirement age for every US citizen. This year will affect your Social Security checks and may mean you retire at a later point than, say, your parents did. For example, individuals born from 1943 to 1954 will reach FRA at 66. This age increases two months with each year, meaning the FRA for a 1955 birth year is 66 years, two months, and so on. If the birth year is 1960 or later, the full retirement age is 67, which is subject to change or increase.

US citizens planning to utilize Social Security benefits as part of their retirement plan will need to wait until their FRA, depending on their total work history. Although some individuals qualify to begin sooner, your checks start to shrink the further below you are from your actual FRA. So, if you enter retirement at age 62, you will only get 70% of your full SS benefit each pay period if your FRA is 67. Each month you put off retirement will increase the amount on each check until your reach the maximum benefit potential at age 70.

But how would you know if you could boost your benefits at your FRA? Every qualified individual has the potential to receive an increase in benefits throughout your FRA year. Plus, with annual cost-of-living adjustments (or COLAs), Social Security benefits will increase across the board. This yearly adjustment ensures your checks remain competitive with inflation. But, unfortunately, a little COLA boost has minimal potential in putting you any farther along financially than it did before the effects of inflation.

Many recipients note a substantial increase in their benefits checks after passing their FRA. This increase is typically due to the release of previously withheld money from the SS earnings test. This situation only pertains to those claiming SS benefits while working under their FRA. In 2022, those beneath their FRA lost $1 from their SS checks for each $2 earned beyond annual earnings of $19,560. Anyone who reaches their FRA in 2022 will lose $1 for every $3 made beyond $51,960 (by their birthday). This money isn’t kept by the SSA forever, though.

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Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.