Generally speaking, there are two age groups when you can receive social security retirement benefits. The full retirement age and the reduced retirement age. These two groups are usually not the same, but they are both important to your financial future.
Full retirement age
Using a Social Security calculator can help you figure out what your full social security retirement age is. Your retirement age will depend on your lifestyle and your current savings. Having a large nest egg is important to an early retirement. If you do not have a large nest egg, you may need to work to supplement your income.
You should also consider the impact of work activity on your benefit.
When you reach full retirement age, you will receive a monthly benefit. The amount you receive depends on how much you earn, the age you retire, and other factors. You may also be subject to a cap on your benefits.
The full social security retirement age is 66 for people born in 1943, 1954, or 1955. It is 67 for people born in 1960 or later. You can also wait until age 70 to receive an additional 8% in monthly benefits. This is called a delayed retirement credit.
Reduced benefits at 62
Taking Social Security benefits at age 62 can be tempting. It’s a guaranteed income, and you’ve already paid into the system for your entire working life. But there are a few things to consider before taking the plunge.
First, you’ll be limited to a lower monthly benefit amount. For example, if you have earned 40 credits during your career and take Social Security benefits at 62, you’ll receive a benefit amount that’s about 30% smaller than if you wait until you reach your full retirement age.
Second, you’ll get a smaller benefit base for the cost-of-living adjustment, or COLA, that’s included in your monthly benefit. Also, you might pay taxes on your benefit.
Finally, you’ll get a smaller benefit amount for each month that you claim early. This is because the benefit is reduced by 5/9 of one percent for each month before the normal retirement age, and another 5/12 of one percent for the months after the normal retirement age.
Reductions at 70
Increasing the Social Security retirement age to 70 would reduce the average Social Security benefit amount by 11.3 percent in 2070. This change would be phased in over time, and reflects the fact that people today are healthier than generations before.
The Advisory Council, which consists of representatives of the Social Security Administration, has proposed two options for raising the full retirement age to 70. These proposals would eliminate more than three-quarters of Social Security’s actuarial imbalance. However, the proposals are not popular with voters.
The first option would raise the full retirement age to 68 years. The Actuary estimates are based on the average mortality experience of men. For the next five years, life expectancy at age 65 is expected to increase by three years. The increase in life expectancy means that more Social Security benefits will be paid out to retired workers. The Actuary estimates for the 2000s are based on the Actuary projections in the 1995 OASDI Trustees Report.
Reductions at 90
Despite the fact that the Social Security Trust Fund is projected to have sufficient resources to pay promised benefits until 2035, the Social Security Advisory Board has proposed two options to increase the full retirement age. The first option would increase the full retirement age to 68 years, while the second would raise it to 70 years. Both options would reduce benefits, and increase poverty rates.
Under the first option, the FRA would be 67 years for new beneficiaries in 2022. This would affect newly eligible beneficiaries in 2005, and surviving spouses in 2022. In 2070, this would affect 82.3 percent of retirement beneficiaries and 72.4 percent of the lowest income and wage quintiles. The average benefit reduction would be 6.5 percent. The maximum benefit reduction would be 35 percent.
Under the second option, the FRA would be 70 years in 2070. This would affect 53.6 percent of dual entitled surviving spouses. The median benefit reduction would be
11.4 percent for ages 70-79. The average benefit reduction would be 1.3 percent to 2.9 percent for ages 62-69.