Understanding Your Full Retirement Age (FRA)
Before you can calculate the reduction for early retirement, you must know your full retirement age (FRA). Your FRA is the age at which you are eligible to receive 100% of your primary insurance amount (PIA), which is your benefit calculated based on your earnings history. This age is determined by the year you were born and is typically between 66 and 67 for most people currently approaching retirement. For anyone born in 1960 or later, the FRA is 67.
The Early Retirement Reduction Formula
The Social Security Administration uses a formula to determine the permanent reduction for claiming benefits before your FRA. For each month you claim early, your benefit is reduced. For the first 36 months, the reduction is 5/9 of 1% per month. For any months beyond 36, the reduction is 5/12 of 1% per month.
For example, claiming 60 months early (from an FRA of 67 to age 62) results in a total reduction calculated as: (36 months 5/9 of 1%) + (24 additional months 5/12 of 1%) = 20% + 10% = 30%. This reduction is permanent and applies for life, though Cost-of-Living Adjustments (COLAs) will still increase the reduced amount over time.
Factors That Influence Your Benefit Amount
Several factors influence your monthly benefit:
- Your Highest 35 Years of Earnings: Your benefit is based on your average indexed monthly earnings (AIME) from your 35 highest-earning years. Fewer than 35 years can lower your average and benefit.
- Working While Claiming Early: If you work before your FRA and earn above a certain limit (e.g., $23,400 in 2025), some benefits may be temporarily withheld. These withheld funds are credited back later as a higher monthly benefit once you reach your FRA.
- Spousal and Survivor Benefits: Claiming early can also reduce potential survivor benefits for your spouse. A spouse claiming on your record before their own FRA may also face a reduction.
A Comparison of Early vs. Full Retirement Benefits
The following table illustrates the potential impact of claiming age on monthly and lifetime benefits for someone with a hypothetical $2,000 FRA benefit, born in 1960 or later:
| Retirement Age | Benefit Adjustment | Monthly Benefit (Example) | Lifetime Benefit (Assuming Avg. Lifespan) |
|---|---|---|---|
| 62 (Early) | -30% | $1,400 | Lower total over lifetime |
| 67 (Full) | 0% | $2,000 | Higher total over lifetime |
| 70 (Delayed) | +24% | $2,480 | Highest total over lifetime |
Note: This table uses a hypothetical FRA benefit of $2,000 to illustrate percentage changes. Your actual benefit depends on your earnings history and life expectancy.
Maximizing Your Retirement Income
Deciding when to start Social Security requires careful consideration. While early claiming offers quicker access to funds, the permanent reduction should be weighed against your need for income. Delaying benefits can offer a significant return. Early claiming might be suitable for those with immediate cash needs, health issues, or who don't expect to exceed average life expectancy. A comprehensive retirement strategy considers all financial resources.
Conclusion
The answer to "how much is my SS benefit reduced if I retire early?" is that it results in a permanent reduction based on a specific formula. Claiming at age 62 with an FRA of 67 means a 30% reduction. While delaying benefits increases payments, the decision should balance financial needs, health, and longevity. Using the SSA's resources can help make an informed choice.
Need help planning your retirement?
For personalized guidance, consult a financial advisor. Resources like the Consumer Financial Protection Bureau can also aid in retirement planning.
