Retirement can be costly, and many Americans rely on Social Security to help with their expenses. A 2024 report from the Transamerica Center for Retirement Studies indicates that 43% of baby boomers consider Social Security their main source of retirement income.

Whether you’re planning to retire in 2025 or have many years until then, it’s essential to understand how Social Security will play a role in your retirement strategy. There’s a key step that everyone should take now.

A crucial number for every worker

If you haven’t already, checking your estimated benefit amount through your mySocialSecurity account is a great starting point. However, an even more vital number to know is your full retirement age (FRA).

Your FRA is the age at which you’ll receive your full benefits based on your earnings and work history. This is the amount you’ll see when you check your estimated benefit online. If you are unsure about your FRA, it could significantly impact your monthly income.

According to a 2024 survey from the Nationwide Retirement Institute, most U.S. adults aged 60 to 65 think their FRA is 64 years old. In reality, your FRA will fall between 66 and 67 years depending on your birth year.

This means many older adults may be expecting their full benefits when they file, despite potentially claiming two to three years too early. While this misunderstanding may seem minor, it can have serious financial repercussions.

Claiming benefits before your FRA leads to reductions for the rest of your life. If your FRA is 67 and you file at 64, you’ll see a 20% reduction in your benefits. If you file as early as age 62, there’s a permanent 30% reduction in your benefits.

Such reductions can translate to hundreds of dollars less each month. According to the Social Security Administration’s data from December 2024, the average retiree receives about $1,975 monthly. A 20% reduction would mean roughly $395 less each month, or about $4,740 each year. A 30% decrease would be around $593 monthly, totaling more than $7,100 annually.

Early filing can have advantages too

It’s important to understand that despite the reductions in benefits, there are good reasons to consider applying early.

For instance, if your health is declining or you wish to retire in your early 60s to enjoy life more actively, claiming early could be beneficial. You may have to accept lower benefits, but not everyone wants to wait until age 66 or later to start receiving Social Security – and that’s perfectly okay.

Filing early can be part of a coordinated strategy with your spouse if both of you qualify for Social Security. One partner might choose to file at 62 for early income, while the other delays their claim to receive larger payments later on.

No matter what you choose, knowing your precise FRA will help you plan effectively. For countless older adults, Social Security is a vital support system during retirement, and understanding how to maximize your monthly benefits based on your age can help you create a plan that aligns with your personal goals.

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