Knowing the difference between early retirement, full retirement age, and delayed retirement is a vital part of successful retirement planning.
When you work, you pay taxes into Social Security. Upon retirement, you get paid a certain amount of Social Security benefits each month, which is based on your highest 35 years of earnings. The amount can vary depending on how much you earn and when you choose to start benefits.
On average, retirees receive about 40% of their pre-retirement income from Social Security. Depending on the age you want to retire, knowing about your benefits can help you calculate how much more income you'll need.
Deciding when to retire and start receiving retirement benefits depends completely on you and your own personal situation and goals. How much you receive from Social Security depends on what age you are when you retire.
What is Social Security retirement age?
When considering which age you want to start receiving your retirement benefits from Social Security, you need to know the retirement age when you can receive full benefits.
To be eligible for Social Security benefits, you need to have earned "credits" toward them. The number of credits you need depends on the year you were born: If you were born in 1929 or later, you need 40 credits. If you stop working early, the credits will remain on your record. If you return to work, more credits can be added. However, you will not get any benefits until you have 40 credits.
Full retirement age
If you reach full retirement age, you'll receive your full Social Security benefit amount.
If you were born from 1943 to 1954, full retirement age is 66
If you were born from 1955 to 1960, full retirement age increases two months each year until it reaches 67
- 66 years and two months
- 66 years and four months
- And so on
If you were born in 1960 or later, full retirement benefits begin at age 67
You can use Social Security's Full Retirement Age Chart to calculate when you'll be able to receive benefits, and how much those benefits may be.
Early retirement age
You can start receiving Social Security benefits as early as age 62. However, if you start benefits before reaching full retirement age, your benefit amount will be reduced until you reach full retirement age. The benefit is reduced 5/9 of 1% for each month before normal retirement age, up to 36 months. If the number of months is greater than 36, the benefit is further reduced by 5/12 of 1% per month.
For example, if you retire at age 62 when your normal retirement age is 67, your benefit will be reduced 30% and you will only receive 70% of your benefit. At 65, you'll receive 86.7% of the benefit. Then at full retirement age, you'll receive 100% of the benefit.
Using the Retirement Age Calculator, you can see how much you'll receive if you retire at full retirement age, or what percentage you'll receive if you retire early.
Delayed retirement age
When you delay retirement, it means you continue to work after reaching full retirement age. Doing so could increase your Social Security benefits. The amount of your benefit will continue to increase up to age 70, though there is no incentive to delay claiming benefits after age 70.
- If you were born in 1933-1934, your monthly rate of increase is 11/24 of 1%, or 5.5% over 12 months
- If you were born in 1935-1936, your monthly rate of increase is 1/2 of 1%, or 6% over 12 months
- If you were born in 1937-1938, your monthly rate of increase is 13/24 of 1%, or 6.5% over 12 months
- If you were born in 1939-1940, your monthly rate of increase is 7/12 of 1%, or 7% over 12 months
- If you were born in 1941-1942, your monthly rate of increase is 5/8 of 1%, or 7.5% over 12 months
- If you were born in 1943 or later, your monthly rate of increase is 2/3 of 1%, or 8% over 12 months
To learn how much your delayed benefit would be, use the Delayed Retirement Credits calculator on Social Security's website.
Full retirement age changes
For a long time, retirement age was considered to be age 65. However, in 1983, a law was passed by Congress to allow for a gradual increase of the age because people are living longer and are generally healthier as they get older. Now, full retirement age is considered 66 or 67 depending on the year you were born.
How much can I earn after full retirement age?
Knowing how much you'll earn after full retirement age is an important step in planning for your future. Your strategy for claiming Social Security benefits can depend on your individual situation, but there are a few things you can do to get started.
Start by signing into your my Social Security account, or create one if you don't have one yet. Then, navigate to the Social Security Retirement Calculator, where you can estimate your benefits at different ages and dates. Find the "Plan for Retirement" section and enter:
- Your estimated retirement age based on when you want your benefits to begin
- Your average future annual salary
- If you want to include a spouse
Then, you'll be shown an estimate of your monthly benefit at full retirement age, early retirement age, and delayed retirement.
While you earn more per month by waiting longer to start receiving Social Security benefits, your personal savings and retirement goals can help you understand when retirement is best.
The Social Security Quick Calculator can also help you estimate your benefits and retirement date options based on your birth date and earnings history. While this is just an estimate, it can help you determine a rough retirement date and your benefit estimate in today's dollars or inflated (future) dollars. Simply enter your date of birth (month/day/year), earnings in the current year, and if you have decided on a retirement date, the month and year in which you plan to retire.
How to calculate full retirement age
Because your full retirement age is when you're able to earn the full benefits, many people wait until that age to retire and apply for Social Security.
Because not everyone has the same full retirement age, you can use the Retirement Age Calculator to learn when you'll be eligible for full benefits.
Why it's important to save for retirement
While a number of factors go into how much you should have saved for retirement, such as the age you want to retire and the lifestyle you hope to have, experts estimate that saving 10x your pre-retirement income by age 67 can help ensure you have enough to maintain your current lifestyle and reach your retirement goals.
While that usually can't happen overnight, it's never too late to start saving. Start by using a retirement calculator to learn if you have enough saved, or how much you may need at the age you expect to retire. Then, make a plan to reach those goals if you haven't already.
Social Security Administration (SSA.gov): Retirement Benefits
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SSA: Estimate Retirement Benefits
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Fidelity: How Much Do I Need to Retire?
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ClearMatch Medicare: 7 Tips About Money Management from Early Retirees
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