SOCIAL SECURITY Q&A: What do I stand to lose when retiring early?
Q. By what percentage would my Social Security retirement be reduced if started at age 63?
A. Retirement benefits are reduced by the number of months started before a person’s full retirement age, or FRA, also called normal retirement age. Determined by year of birth, FRA is scheduled to reach age 67 for people born in 1960 or later.
Social Security retirement benefits can be started anytime during the year if you are at least age 62. There is no need to wait for your birthday. As a percentage, retirement benefits are reduced by 5/9 of one percent for each month before FRA, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.
For example, if the number of reduction months is 60, the maximum number for retirement at 62 when FRA is 67, then the benefit is reduced by 30 percent. This maximum reduction is calculated as 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent.
Total percentages of reduction may vary depending on a person’s FRA because the numbers of reduction months are different from their FRA to age 62. For comparison, FRA is age 66 for people born between 1943 and 1954. For them, starting benefits at age 62 will provide 75 percent (25 percent reduction) of the full retirement age amount because an additional 48 months are involved. However, FRA is age 66 and 6 months for people born in 1957. For them, starting benefits at age 62 will provide 72.5 percent (27.5 percent reduction) of the full retirement age amount because an additional 54 months are involved.
Monthly retirement percentages are readily available on the Social Security website. Go to “find your retirement age” in the retirement planner section at www.socialsecurity.gov/retire2. Click on your year of birth for monthly percentages.
Note that Social Security survivor benefits, when based on age, are also reduced by the number of months before full retirement age involved but FRA for survivors benefits is different from FRA for retirement. See www.socialsecurity.gov/survivorplan/survivorchartred.htm.