What Age Is Retirement for Social Security Benefits?

Planning for retirement for social security is crucial in securing your future. Take the time to understand all your options so you know when to retire to best utilize your Social Security benefits.
Retirement and Social Security

If you are like most Americans, you’re probably not quite sure how the elements of social security retirement benefits work. At what age can you start collecting benefits? How does early retirement affect your benefit amount? It’s essential that you thoroughly understand social security as it applies to you, including when you might be eligible, so you can appropriately prepare for your retirement.

Below, we’ll discuss the various options you have. Making informed decisions and creating a smart financial plan are some of the best things you can do for your retirement years. 

Full Retirement Benefits

Full retirement for social security is age 66 for anyone born between 1943 and 1954. The average retirement age has gradually increased over time. Therefore, eligibility for social security benefits has been set at age 67 for those born in 1960 and later.

Where your birth date falls within the month you were born will also impact how and when you will receive your benefits. Anyone born on the first of January must refer to the prior year when calculating benefits and full retirement age. Similarly, those born on the first day of the month receive benefits based on the previous month.

The amount you are entitled to for full retirement benefits depends on your work history and earnings. Your benefit is calculated using the 35 years during which your pre-tax earnings were the highest. Feeling lost? You can use the Social Security Administration’s benefits calculator to estimate your benefit amount.

Early Retirement Benefits

You don’t have to wait until you reach full retirement age to begin collecting social security, but early retirement for social security does decrease your benefit amount. Depending on the year of your birth, early retirement at age 62 reduces your benefit by anywhere from 25 to 30 percent. For example, an individual born between 1943 and 1954 who decides to take early retirement benefits will receive $750 of the $1,000 monthly benefit they would be entitled to at full retirement age. That amount drops to $700 per month for anyone born in 1960 or later. You must be 62 years or older for a full month before benefits can begin.

Spousal benefits are further reduced with early retirement, ranging from 30 to 35 percent. It’s important to remember that this reduction is calculated after the standard 50% reduction applied to all spousal benefits.

Late Retirement Benefits 

Just as you can choose to retire early, you also have the option to delay your retirement up to age 70. Every month you do so increases your benefit amount by a certain percentage. This increase stops once you reach 70, even if you continue to delay collecting your benefits. The rate of increase for a 12-month period starts at 5.5 percent for people born between 1933 and 1934 and increases to 8 percent for those born in 1943 or later. The increase can be broken down by month as well.

If you decide to retire sometime between your full retirement age and age 70, some of the delayed retirement credits aren’t applied until the following year. This means your benefit amount will initially include all delayed retirement credits through the year prior to your retirement. Once you reach January of the following year, you start to receive the higher benefit amount that includes the final year.

The biggest advantage of delaying your retirement for social security is the increase in your monthly benefit amount. Another advantage is that you will begin to receive your benefits immediately since you’ve already reached full retirement age. You may even be able to receive retroactive benefits for up to six months if you were of full retirement age during that time period. Keep in mind that you can’t apply for retroactive benefits for any time prior to when you reached full retirement age.

Don’t Delay Medicare

Even if you choose to delay your retirement, make sure that you still sign up for Medicare when you reach age 65. This won’t affect your retirement benefits. Signing up for Medicare late may delay your access to coverage or result in higher costs.

Choosing When to Retire

Graphic of two old people with money falling down around them

As you can see, there is no single age that you should aim for when it comes to retirement. There are pros and cons to waiting until you reach your full retirement age and to taking early benefits. Therefore, you must carefully consider your situation to determine which option is right for you. Waiting until you can collect the full benefit gives you a larger amount each month. However, while taking early retirement reduces your benefit, some individuals find that the reduction is worth being able to collect benefits sooner. 

Here are some factors to consider when making your decision.

Employment Plans 

You can continue to work while receiving benefits, but there are income limits that affect your eligibility and the amount you receive.

Life Expectancy

Your lifestyle choices, health and family history all play a part in your life expectancy. Take this into consideration when planning your finances for retirement. If you have a long life expectancy, you need to have extra money to help you out in your later years. Find out if there are limits to any pensions you are entitled to as well, as this can also affect how much you require for retirement.

Health Insurance

Many individuals have health insurance that is tied to their job. If you retire early and aren’t yet eligible for Medicare, consider whether you will still have or need health insurance through an employer. 

Eligibility through Another

If you qualify for social security benefits through a spouse or as a survivor, your options may differ. Spousal benefits are reduced by 50 percent, so you may need to delay your benefits if you need a higher monthly amount.

Other Income 

Take into account whether you have another source of income to live off of or instead need your benefits immediately. If you are employed or receive additional support, it may be best to wait to collect social security until you can receive the total amount. However, if you have no other steady income, taking a reduction to get benefits sooner might be a necessity.

Family Members 

Do you have a spouse or children that are eligible to receive benefits based on your record? Once you start to collect your own benefits, they may qualify as well. Spousal benefits are capped at 50 percent of the calculated benefit for the worker, even if the spouse has also reached full retirement age.

The Time to Start Planning Is Now! 

Planning for retirement for social security is crucial in securing your future. Take the time to understand all your options so you can choose the one that’s best for you.

You might also be interested in: Your Guide To Understanding Social Security

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