3 facts about Social Security every Baby Boomer should know

Three facts about Social Security, including the full retirement age, how the date you retire will affect your spouse, and what role your life expectancy plays in your benefits are very important to baby boomers.

The oldest Baby Boomers are now in retirement age, while the youngest are in their 50s. Considering that many Baby Boomers don’t have substantial retirement savings, Social Security is set to remain a critically important source of income for millions of that generation as they retire over the next couple of decades.

Here’s a closer look at three important facts that play a big role in how well Social Security will work for you and how much income you’ll get. Whether you’re ready to retire soon or still a decade or more away, these three facts about Social Security will affect you.

Full retirement age is set to change soon

Once you turn 62, you become eligible for Social Security retirement, but at a reduction to your full benefit, which you become eligible for at “full retirement age.” For anyone born in 1943-1954, the full retirement age is 66. But for anyone born in 1955 or later, you should know that full retirement age is set to increase.

Starting in 2020, anyone born in 1955 will reach full retirement age at 66 years, two months. For those born in 1956, they’ll have to wait another two months, to 66 years, four months. This two-month increase will continue until people born in 1960 or later reach the new full retirement age of 67 in 2027.

Why does this matter for baby boomers? Because it will affect how much of their benefit they’ll receive, based on how early you retire. For instance, someone born in 1954 would have turned 62 in 2016, thus eligible for Social Security at a reduced level. Since their full retirement age is 66, they would receive 75% of their full benefit if they retired at age 62.

But someone born in 1958, for instance, would have a full retirement age of 66 years, eight months. But if that person retired at 62, they would only get 71.7% of their full benefit. It may not sound like much difference, but if you live to age 80, that’s about $7,100 less on a $1,000-per-month benefit, not even including cost-of-living adjustments.

In other words, it’s very important to know what your full retirement age is, no matter what age you plan to retire. A few months’ difference could make thousands of dollars in difference in how much money you get.