How Full Retirement Age Impacts Your Social Security Benefits
When you claim Social Security benefits earlybefore your full retirement ageyour total monthly benefit is decreased by a small percentage of your PIA for each month until your full retirement age. Conversely when you delay claiming benefits until after your full retirement age, it boosts your monthly benefit payment by a small percentage of your PIAup to the year you turn 70.
Your Social Security benefit is reduced by around half a percent for each month between the date when you claim benefits early and your full retirement age. At the very most, you could see a reduction of up to 30% of your PIA by claiming benefits before reaching full retirement age. A PIA of $2,000, for example, could be cut to $1,400 if you take your benefit as soon as you are eligible, rather than waiting for full retirement age.
On the other hand, delaying Social Security benefits until after your full retirement age could garner you a larger monthly benefit.
For every month after full retirement age, you add two-thirds of 1% per month up until you attain age 70, says Carroll. This means an increase of up to 8% per year that you delay taking benefits between full retirement age and age 70. For a beneficiary with a full retirement age of 66 and 6 months, a PIA of $2,000 could be increased to $2,600 by waiting to take benefits until age 70.
Social Security disability benefits do not have any specific retirement age, since disability can strike at any age.
Claiming Your Benefits After Full Retirement Age
On the other hand, youâll be rewarded with a bigger check if you start claiming your Social Security benefits after your full retirement age. These delayed retirement benefits will accumulate monthly and max out when you attain the age of 70. This means that there will be no further benefits or incentives for waiting to claim your Social Security benefits after the age of 70.
Letâs break it down.
- Your monthly benefits will increase by 24% if you start claiming your Social Security benefits at the age of 70 .
- Your monthly benefits will increase by 16% if you start claiming your Social Security benefits at the age of 69 .
- Your monthly benefits will increase by 8% if you start claiming your Social Security benefits at the age of 68 .
Hereâs an example. If you supposed to get a Social Security benefit of $2,000 per month at your full retirement age of 67, your monthly benefit will be $2,160 per month if you start claiming the benefits at the age of 68, $2,320 per month if you start claiming the benefits at the age of 69, and $2,480 per month if you start claiming the benefits at the age of 70.
What Amount Will I Receive From Social Security
Social security uses a fairly complex formula for calculating social security retirement benefits but the short version is the formula uses your highest 35 years of income. If you have less than 35 years are income, zeros are entered into the average for the number of years you are short of 35 years of income. They also apply an inflation adjustment to your annual earnings in the calculation.
You can obtain your Social Security statement by creating an account at www.ssa.gov. Your statement contains lots of valuable information, such as:
Your estimated benefit amount at full retirement age
Eligibility for benefits
A detailed history of how much you’ve earned each year
Keep in mind that the figures in your statement are just estimates, and your eventual benefit amount could be quite different, especially if you’re relatively young now.
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Entitlement To Benefits After Reaching Full Retirement Age
On the other hand, if you claim your Social Security benefits past your full retirement age, you’ll be rewarded with a bigger check. These deferred benefits accrue monthly and peak when you reach age 70. This means there are no more benefits or incentives to wait after age 70 to claim your Social Security benefits.
Let’s break it down.
- Your monthly benefits increase by 24% if you claim your Social Security benefits at age 70 .
- Your monthly benefits increase by 16% if you start claiming your Social Security benefits at age 69 .
- Your monthly benefits increase by 8% if you claim your Social Security benefits at age 68 .
Here is an example. If you were to receive a $2,000 per month Social Security benefit at your full retirement age of 67, your monthly benefit will be $2,160 per month if you begin claiming benefits at age 68 and $2,320 per month if you begin claiming benefits at age 69 and $2,480 per month if you begin claiming benefits at age 70.
How Social Security Credits Work
Qualifying for Social Security isn’t that difficult. Over the course of your working life, you need 40 credits to be eligible for benefits, which is equal to 10 years of full-time work. In 2023, you get one credit for every $1,640 of earnings, which is an increase from the 2022 figure of $1,510, up to a maximum of four credits per year.
Social Security calculates your benefit amount based on your earnings over the years, whether you were self-employed or worked for an employer. The more money you earned, the more you paid into Social Securityâand the higher your future benefitsâup to certain limits. The math is much more complicated than this sounds, but that’s basically how it works.
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Full Retirement Age For Getting Social Security
Full retirement age is the age at which you can claim your standard Social Security benefit, or your primary insurance amount , from Social Security. Your PIA is the standard amount you can expect to receive based on your inflation-adjusted average wages earned throughout your career. Full retirement age is 66 for those born in 1954 and 67 for those born in 1960 or later — it varies depending on your birth year.
It is important to know your full retirement age, as it affects when you can claim Social Security without reducing your benefits, the amount of delayed retirement credits you can earn in order to raise your benefits, and how much you can earn from working while receiving Social Security without forfeiting any of your benefits.
Do I Automatically Get Medicare When I Turn 65
Some people automatically get Medicare at age 65, but those numbers have declined as the Medicare and Social Security ages have continued to drift apart.
Most people who automatically get Medicare at age 65 do so because they have been receiving Social Security benefits for at least four months before turning 65. Traditionally, Medicare premiums are deducted from your Social Security check. For the longest time, you could retire with full Social Security benefits at 65 and start on Medicare at the same time.
You are still automatically enrolled in Medicare Part A and Part B at 65 if youre drawing Social Security, but not as many people draw Social Security that early these days because of changes to the eligibility age for full Social Security benefits.
In 2000, the Social Security Amendments of 1983 began pushing back the standard age for full Social Security benefits. The progressive changes are nearing their conclusion: Beginning in 2022, the standard age for full benefits will be 67 for anyone born after 1960.
Besides the Medicare eligibility age of 65, what remains unchanged is that you can opt to begin drawing partial Social Security benefits as early as age 62. So, if you opt for accepting partial Social Security benefits before age 65, you are automatically enrolled in Medicare.
A smaller group of people also automatically get Medicare at age 65: people who receive Railroad Board benefits for at least four months before 65.
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How Much Will You Need To Retire If You Were Born In 1964
It doesnât matter whether you were born in 1964, earlier or later, answering the question âwhen can I retire?â is not just about your Social Security benefits. In most cases, your Social Security benefits wonât be enough to provide for a comfortable retirement that many Americans dream of.
The idea here is that Social Security benefits only equates to 40% of your earnings later in your career. This is far much less and canât even replace half of your income. For this reason, you most certainly need another source of income to supplement your Social Security benefits.
With that in mind, the amount that you need to retire comfortably depends on the lifestyle that you choose to lead during your retirement. So if you were born in 1964, you can retire at any time you wish as long as your finances permit. If not, you can wait to retire in 2026 when youâll be 62 and even consider delaying claiming the benefits until 2031 when youâll be 67.
When Will I Begin Receiving My Social Security Benefit
You are entitled to your full social security benefit at your Normal Retirement Age . Your NRA varies based on your date of birth. Below is the chart that social security uses to determine your normal retirement age or full retirement age:
social security retirement age
For example, if you were born in 1965, your NRA would be 67. At 67, you would be eligible for your full retirement benefit.
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So Why Do I Care When I Turn 65
When you turn 65, you are eligible for Medicare, which matters if you are concerned about health care costs.
In the United States of America, there is absolutely no way to ignore the fact that you are about to turn 65 years old, because Medicare wont let you.
Six months prior to turning 65, you begin to receive mailings from private insurance companies offering you so-called Medigap policies which will cover the costs not covered by the standard Medicare Parts A and B, which are provided by the federal government.
It is estimated that one out of every three Medicare recipients utilize a Medigap policy to defray medical care costs.
To confuse people even more about whether Social Security cares that you are turning 65, you must go to the Social Security website, ssa.gov, to sign up initially for Medicare. Your official information from Medicare will come in the mail from the Social Security department of the federal government.
Otherwise, the main reason to anticipate turning 65 is that you are likely to pay less for food at all of the restaurant chains in America which offer discounts to senior citizens.
What Can I Do To Plan Ahead
If you are still working, you are in good health, you like your job and you see no reason to stop working, delaying benefits may be the best way to plan ahead.
This is not a one size fits all answer though.
There is such a thing as a breakeven benefit analysis that we Financial Planners like to run because it helps clients make the best decision for their situation.
The fact that you are educating yourself is also a huge advantage and the best way to plan.
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Medicare Eligibility Age Chart
Most older adults are familiar with Medicare and its eligibility age of 65. You can qualify for Medicare Part A and Medicare Part B by:
- Being age 65 or older
- Living with a qualifying disability
- Living with certain health conditions, like end-stage renal disease or amyotrophic lateral sclerosis
Individuals under 65 and already receiving Social Security or Railroad Retirement Board benefits for 24 months are eligible for Medicare. Still, most beneficiaries enroll at 65 when they become eligible for Medicare.
Born In 1: What Age Can I Retire
If you were born in 1968, you can retire at any age, you can access your super at 60 and you will be eligible for Age Pension payments at age 67. However, if you have sufficient investments producing enough of an income to cover your expenses, you can retire whenever you like. But, more often than not, the retirement age for someone born in 1968 will coincide with when they can access their super or collect social security.
Given that the age you can first access your super comes before the age you can collect social security, we will begin with superannuation.
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Delayed Retirement Or Early Retirement
You can claim benefits as early as age 62, but your monthly check will be cut by 25% for the rest of your life. The way the math works out, for each year you take your social security benefit prior to your normal retirement age, you benefit is permanently reduce by 6% for each year you take it prior to your NRA.
On the opposite end of that scenario, if you delay claiming past your NRA, you will get a delayed credit of approximately 8% per year plus cost of living adjustments.
There are a number of variables that factor into this decision as to when to turn on your benefit. Some of the main factors are:
Do you plan to keep working?
What is your current tax bracket?
The amount of retirement savings that you have
Income difference between spouses
social security age chart
Full Retirement Age And Your Benefit
The SSA has a set formula to calculate the amount of your monthly benefit check, also known as your primary insurance amount . The formula is somewhat convoluted, but it factors in your 35 highest years of earnings, each of which are indexed for inflation.
Your FRA determines when youre eligible to receive your PIA. So if you elect for benefits any time before your FRA, youll receive a lower monthly benefit. If you wait until after your FRA to elect, youll receive a higher benefit. For every month you wait from the age of 62 until your FRA, your monthly benefit will increase incrementally. For instance, if you were born in 1960 or after, you can receive 86.1% of your benefits at age 64 and 11 months. You can collect 92.2% of your benefits once you hit 65 and 10 months.
What may be confusing to some people is that the amount you receive at your FRA is not actually your maximum possible benefit. You can continue to delay electing for benefits past your FRA and your benefit amount will continue to increase. Once you reach age 70, your benefit amount will max out.
But even if its not the age of your maximum benefit, your FRA has other relevance. If youre working and receiving Social Security before hitting your FRA, the SSA may deduct some money from your benefit amount.
For the 2022 tax year, your benefit will be reduced by $1 for every $2 you earn above the earnings limit of $19,560. For the 2021 tax year that earnings limit is $18,960.
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Should I Keep Working If I Want To Increase My Monthly Benefit Once I Already Started To Receive Benefits Before My Full Retirement Age
You actually can increase your monthly income if you continue to work but whether or not you should keep working depends on a lot of factors. Mainly health and your need for additional income.
It can be worth considering it if you are say, 64 and in good health because you can keep working and increase your benefit for 6 extra years. Perhaps it wont be much but its worth looking into, especially, if you are able to secure a high-paying job. Social Security benefits are comprised of the 35 highest-earning years. Do you see how 6 years of high earning can make a decent impact?
On the flip side, if you are 68 and not feeling too good these days, the burden of getting back into the work field could end up costing you your health.
Getting Your Super Early
In some circumstances, you can access your super before you reach your preservation age:
- Incapacity if you’re unable to work or need to work fewer hours because of a medical condition.
- Severe financial hardship if you can’t meet your living expenses and have been receiving Commonwealth benefits for 26 weeks.
- Compassionate grounds to pay for unpaid expenses. These could include medical treatment, modifying your home or vehicle because of a severe disability, funeral expenses, or a loan repayment to prevent you losing your home.
- Terminal medical condition if you have a terminal illness or injury.
If you need to access your super for any of these reasons, a financial counsellor can help with:
- understanding your options
- other expenses you’re struggling to manage, such as housing and bills
See early access to your super on the Australian Taxation Office website for more information.
There are heavy penalties for breaking the rules around accessing your super early.
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Superannuation: When Can I Retire
Accessing your superannuation is based on your age and employment status.
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Provided you have reached your superannuation preservation age, you can access your super before or after full retirement.
Your preservation age is the first time you can withdraw your super in some form or another.
The table below details your superannuation preservation age.
|Date of Birth|
|1 July 1960 30 June 1961||56|
|1 July 1961 30 June 1962||57|
|1 July 1962 30 June 1963||58|
|1 July 1963 30 June 1964||59|
Option 1: Transition to Retirement Pension
Once you reach your superannuation preservation age of 60, you can use your super to start a TTR Pension.
To do this, you notify your super fund of how much of your super balance you would like to use to start a TTR Pension.
Also, your super accumulation account may have insurance within the account. If you close the account, the insurance will be cancelled and you will no longer be covered.
You are able to commence a TTR Pension with your super regardless of your employment status.
Payment frequency will be determined by your superannuation provider.
The tax on super investment earnings within a TTR Pension is a maximum of 15%