For everyone who has paid into the Social Security system, there’s an official “full retirement date” – meaning the date corresponding to the age at which one qualifies for full, unreduced Social Security benefits. It used to be 65 years of age for everyone, but when Social Security was modified back in the 80s, the full retirement age was raised for everyone, slowly creeping towards 67 for folks born after 1960. Folks born between 1943 and 1956 – the ones who will be reaching “full retirement age” in the next 8 years, the age is 66.
What that “full retirement age” means is the age at which you may start taking your full Social Security benefits. Folks may start sooner than that – as soon as 62 – though doing so means a permanently reduced payout, and a potentially very high tax if one starts working again. If possible, it’s best not to start early.
However, there’s a huge benefit to waiting a few years if you can. For someone whose full retirement age is 66, every year the start of Social Security is delayed translates into an 8% increase in monthly benefits – for the rest of his or her life. To put that into firm numbers, suppose you were just about to turn 66 and your full benefit was going to be $1000/month. If you wait a full year to start collecting your benefits, you are forgoing $12,000 – a full year’s worth of those $1000/month payments. In exchange, though, when you do start, your starting amount will be $1080/month.