Understanding full retirement age is crucial for anyone planning their retirement and Social Security benefits. This age, set by the Social Security Administration (SSA), determines when you can receive 100% of your retirement benefits based on your earnings history. You can start receiving benefits as early as age 62, but doing so will result in a reduction of your monthly benefit amount. Conversely, delaying your benefits past your full retirement age can increase your monthly payments.
To illustrate how your birth year affects your full retirement age and subsequent benefits, consider the following chart:
This chart, adapted from the Social Security Administration, outlines the full retirement age based on your year of birth and the corresponding reduction in benefits if you claim them at age 62. For example, if you were born between 1943 and 1954, your full retirement age is 66. If you were born in 1960 or later, your full retirement age is 67. The years in between gradually increase the full retirement age.
How Full Retirement Age Impacts Your Benefits
The age at which you decide to retire significantly affects the amount of Social Security benefits you receive. Here’s a breakdown:
- Early Retirement (Age 62 to Full Retirement Age): Electing to receive benefits before your full retirement age means you’ll receive a reduced monthly benefit. The reduction is a percentage for each month before your full retirement age that you start receiving payments. As shown in the chart, for someone with a full retirement age of 67 (born in 1960 or later), starting benefits at 62 reduces the amount to approximately 70% of the full benefit.
- Full Retirement Age: Retiring at your full retirement age allows you to receive 100% of your scheduled Social Security benefits. This is the age at which you are entitled to your primary insurance amount, calculated based on your lifetime earnings.
- Delayed Retirement (Beyond Full Retirement Age up to Age 70): If you can afford to wait beyond your full retirement age to claim benefits, you can increase your monthly payments. For each year you delay, you earn delayed retirement credits, increasing your benefit amount. However, there is no benefit to delaying beyond age 70.
Let’s look at an example. Imagine your full retirement age is 67, and at that age, you would receive $1,000 per month.
- Retiring at 62: You might receive around $700 per month (approximately 70% of your full benefit).
- Retiring at 67 (Full Retirement Age): You receive $1,000 per month (100% of your full benefit).
- Retiring at 70: You could receive significantly more than $1,000 per month due to delayed retirement credits.
Understanding the Full Retirement Age Chart
The chart provided by the Social Security Administration is a helpful tool to quickly understand how your birth year relates to your full retirement age and the potential reduction in benefits for early retirement.
| Year of Birth | Full Retirement Age | Months between age 62 and full retirement age | Benefit at Age 62 (Approximate Reduction) | Spouse’s Benefit at Age 62 (Approximate Reduction) |
|---|---|---|---|---|
| 1943-1954 | 66 | 48 | 75% (25% reduction) | 70% (30% reduction) |
| 1955 | 66 and 2 months | 50 | 74% (25.83% reduction) | 69% (30.83% reduction) |
| 1956 | 66 and 4 months | 52 | 73% (26.67% reduction) | 68% (31.67% reduction) |
| 1957 | 66 and 6 months | 54 | 72.5% (27.50% reduction) | 67.5% (32.50% reduction) |
| 1958 | 66 and 8 months | 56 | 71.6% (28.33% reduction) | 66.6% (33.33% reduction) |
| 1959 | 66 and 10 months | 58 | 70.8% (29.17% reduction) | 65.8% (34.17% reduction) |
| 1960 and later | 67 | 60 | 70% (30% reduction) | 65% (35% reduction) |
Key Points from the Chart:
- Year of Birth: Find your year of birth to determine your full retirement age.
- Full Retirement Age: This is the age when you receive 100% of your benefits. Notice how this age has gradually increased over time.
- Benefit at Age 62: This column shows the approximate percentage of your full benefit you would receive if you start benefits at age 62. The reduction is significant, highlighting the trade-off between receiving benefits earlier and receiving a lower monthly amount.
- Spouse’s Benefit at Age 62: This section illustrates how a spouse’s benefits are also reduced if claimed before the full retirement age.
Making Informed Retirement Decisions
Deciding when to start receiving Social Security benefits is a personal choice with both advantages and disadvantages to claiming early versus delaying.
Advantages of Early Retirement:
- Receive benefits sooner: You start receiving payments earlier, which can be beneficial if you need the income or want to retire as soon as possible.
- Potential for longer overall payout: If you live a long life, you might receive more total benefits over time even though the monthly amount is lower.
Disadvantages of Early Retirement:
- Reduced monthly benefit: Your monthly payments will be permanently reduced.
- Less income later in life: A lower monthly benefit can impact your financial security, especially later in retirement when healthcare and other costs may rise.
Advantages of Delaying Retirement:
- Increased monthly benefit: You receive a higher monthly payment for the rest of your life.
- Financial security in later years: A larger monthly income can provide more financial stability as you age.
Disadvantages of Delaying Retirement:
- Delaying access to funds: You have to wait longer to start receiving benefits, which might not be feasible for everyone.
- Potential for lower overall payout: If you have a shorter lifespan, you might receive less total benefits compared to starting earlier.
It’s important to consider your individual circumstances, health, financial needs, and life expectancy when deciding when to claim Social Security benefits. Regardless of when you decide to retire, remember to apply for Medicare within 3 months of turning 65 to avoid potential increases in your Medicare Part B and Part D costs. Understanding your full retirement age is a critical first step in making informed decisions about your retirement and Social Security benefits.
