Social Security's Confusing 'Full Retirement Age' May Get a Rebrand

Claiming Social Security retirement benefits could soon become a little easier to understand.

Bipartisan legislation that aims to simplify the terminology related to claiming retirement benefits is picking up steam in Congress. Earlier this month, the Claiming Age Clarity Act advanced through the House Ways and Means Committee in a 41-to-1 vote, and a companion bill has been introduced in the Senate.

As its name implies, the entire purpose of the bill is to clarify when Americans can start claiming their retirement benefits — and the effects of doing so at various ages.

If passed, the bill would require the Social Security Administration to update three main terms it uses in rules and other public communications.

• “Early eligibility age” would become “minimum benefit age.” The earliest age someone can begin receiving retirement benefits is 62. However, doing so comes with a permanent reduction in benefits of up to 30%.
• “Full retirement age” would become “standard benefit age.” This is age 66 or 67, depending on one’s birth year.
• “Delayed retirement age” would become “maximum benefit age.” Age 70 is the latest age at which someone can begin receiving retirement benefits. Doing so comes with an 8% annual increase in benefits, up to 24% above the standard benefit.

“Hard-working Americans deserve simple, straightforward information when planning for retirement, especially when it comes to claiming Social Security,” Michele Stockwell, president of Bipartisan Policy Committee Action, said in a statement when the bill was introduced on Sept. 10.

AARP, the nonprofit advocacy group for older Americans, says it has long supported efforts to simplify Social Security terminology.

“These changes will help people better understand the lasting impact of their claiming choices,” Bill Sweeney, AARP’s senior vice president on government affairs, wrote in a recent letter to Congress.

Americans struggle with nuances of Social Security benefits

Older Americans are increasingly reliant on Social Security retirement benefits to make ends meet. According to a Nationwide Retirement Institute survey in August, 56% of Social Security recipients said they could not survive financially if they missed even half of a monthly payment.

The survey also found that about 8 in 10 Americans could not accurately identify the age at which they would receive standard retirement benefits.

“Too many near-retirees lack clear information about how their claiming age affects benefits,” AARP's Sweeney said in his letter.

AARP’s own research shows that while many Americans broadly understand that waiting to claim benefits could increase them, 76% couldn’t identify the correct age to maximize payments, which is 70.

With the financial stakes so high, mistakenly claiming benefits at the wrong age could have disastrous long-term consequences on retirees’ finances.

For instance, the average monthly retirement benefit is currently $1,955, according to the Social Security Administration.

Claiming benefits too early could result in a penalty of up to $586.50, reducing the monthly payment to just $1,368.50. On the other hand, after waiting until age 70 to fully maximize benefits, the monthly payment could be as high as $2,425.20.

In other words, depending on the age you claim your benefits, your monthly payment could hypothetically range between $1,368.50 and $2,424.20 — or over $1,000 a month.

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