The most important Social Security chart you’ll ever see

If you talk to a group of retirees, I’m willing to bet that a good number of them will agree on how beneficial Social Security is to their retirement finances. I’m also willing to bet that many of them will attest that Social Security isn’t always the easiest program to navigate.

There is no shortage of numbers surrounding Social Security, and many of them change annually. That said, if you want to cut through some of the noise and focus on some of the most important numbers, look no further than the following chart showing full retirement ages (FRAs).

It’s probably the most important Social Security chart you’ll ever see.

Image source: The Motley Fool.

Your monthly benefit is based on your full retirement age

This is the most important chart you’ll see because your FRA plays a key role in determining your monthly Social Security benefit. It’s all about when you claim in relation to the FRA.

Your FRA is when you are eligible to receive your Primary Sum Assured (PIA), which you can think of as your basic monthly benefit amount. From there, your monthly benefit is adjusted based on whether you claim before or after FRA.

The earliest you can claim Social Security is age 62, but your monthly benefit is reduced based on how far you are from your FRA. If you are within 36 months, benefits are reduced by 5/9 of 1% monthly. Each additional month further reduces monthly benefits by 5/12 of 1%.

If you choose to delay benefits beyond the FRA, your monthly benefit will increase by 2/3 of 1% each month until age 70.

Spousal benefit amounts are based on full retirement age

Spousal Social Security benefits allow someone to receive Social Security benefits based on their partner’s work history and earnings if they have been married for at least one year. To receive spousal benefits, you must either be at least 62 years old, take care of a child under 16, or take care of a disabled child.

The most someone can receive by claiming spousal benefits is 50% of the primary claimant’s spouse’s monthly benefit. For example, if the primary claimant receives $2,000 per month, the recipient of spousal benefits can receive up to $1,000 if they are on FRA.

Like standard benefits, spousal benefits are reduced if someone claims them before FRA, but the reduction amounts differ. If you receive spousal benefits and claim before FRA, monthly benefits are reduced by 25/36 of 1% each month up to 36 months. Each additional month further reduces benefits by 5/12 of 1% each month.

Social Security’s retirement income test revolves around full retirement age

Many people continue to work and earn money after claiming Social Security, either for financial reasons or because they love what they do and aren’t ready to stop. There is absolutely nothing wrong with doing this.

However, if you claim benefits before FRA, you’ll need to monitor how much you earn, as some of your benefits may be withheld. This is because Social Security will subject you to it retirement income test (RET) if you claim early benefits and earn above a certain limit.

The earnings limit is $22,320 for 2024 if you don’t get to FRA this year. Social Security will reduce your monthly benefits by $1 for every $2 you earn over the limit. If you hit the FRA this year, the earnings limit is $59,520, with benefits reduced by $1 for every $3 earned over that amount.

The good news is that your benefits are not permanently lost because of the RET. Once you reach full retirement age, Social Security recalculates your benefits and adds them gradually amount withheld.