Whats Full Retirement Age
Full retirement age is when youre eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1951 or later, your full retirement age is now some point after age 65all the way up to age 67 for those born after 1959. If you were born before 1951, youve already reached age 66 and full retirement age.
Retirement ages for full Social Security benefits
If you were born in
Your full retirement age is
1950 or earlier
Myth #: Your Benefits Are Based Only On Wages You’ve Earned Before Age 65
How your Social Security benefit is calculated can seem mysterious. However, it’s important to know a few essential facts to aid your claiming strategy. You can use the tools on SSA.gov to do the calculations.
- Your benefit is calculated based on your highest 35 years of earnings they don’t have to be consecutive years or before age 65.
- If you work past age 65, those earning years will be included, so long as they are high enough to be part of your highest 35 years.
- Even working part-time after turning 65 may be part of your highest 35 years of earnings.
- To be eligible for Social Security, you must have a minimum of 10 years of covered employment , which equates to 40 credits in the Social Security system.
- If you don’t have 35 years with earnings, zeros will be included in the calculation.
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How To Get A Copy Of Your Social Security Statement
The SSA mails out Social Security Statements to follks age 25 and over before their birthdays during their 25, 30, 35, 40, 45, 50, 55, and 60 years. For those age 60 until retirement, the SSA will send out statements every year. You can also go online to get a copy of your statement or view it online. Go to www.ssa.gov/mystatement/ and open an account with Social Security to view your statement.
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Statement Of Contributions To The Qubec Pension Plan
Your contribution information will be on your CPP Statement of Contributions if:
- you have contributed to the CPP
- you have contributed to the Québec Pension Plan , and
- you live outside of Québec
You must contact Retraite Québec for a Statement of Participation in the QPP if:
- you have contributed to the QPP only
- you have contributed to the CPP and the QPP but currently live in the province of Québec, or
- you live outside of Canada and your last contribution was made to the QPP
You can write to them at the following address:
How To Correct An Error On Your Social Security Statement
If you have evidence of your covered earnings in the year or years for which you think Social Security has made an error, call Social Security’s helpline at 800-772-1213, Monday through Friday, from 7 a.m. to 7 p.m. This is the line that takes all kinds of Social Security questions, and it is often swamped, so be patient. It is best to call early in the morning or late in the afternoon, late in the week, or late in the month. Have all your documents handy when you speak with a representative.
If you would rather speak with someone in person, call your local Social Security office and make an appointment to see someone there, or drop into the office during regular business hours. If you drop in, be prepared to wait, perhaps as long as an hour or two, before you get to see a representative. Bring with you two copies of your benefits statement and the evidence that supports your claim of higher income. That way, you can leave one copy with the Social Security worker. Write down the name of the person with whom you speak so that you can reach the same person when you follow up.
The process to correct errors is slow. It may take several months to have the changes made in your record. After Social Security confirms that it has corrected your record, request another benefits statement to make sure the correct information made it to your file.
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When Should I Start Collecting Social Security
Ultimately, the decision of when to begin collecting Social Security is one you have to make. It depends on your age, your health status, how much you spend and how much you have saved. Its generally best to start collecting as late as you can, because you get a larger monthly payment, which is adjusted for inflation each year.
Consider a retiree who was born in 1950 and averaged $50,000 a year in salary. If she has $3,000 a month in expenses, her Social Security check would cover 48 percent of her expenses if she started Social Security at age 62. If she waited till age 70, her check would cover 84 percent of her expenses. Every year she delays retirement, her Social Security payout which is adjusted annually for inflation rises by about $1,635.
Traditionally, the retirement system in the U.S. has been a three-legged stool: Social Security, savings and pensions. Social Security was never intended to be the sole source of income for retirement. Increasingly, however, employers have been moving away from their employer-sponsored pension plans in favor of tax-deferred retirement savings accounts, such as 401 plans.
Payroll Taxes Could Increase
Workers contribute 6.2% of their paychecks into Social Security, which is matched by their employers.
However, those payroll taxes only apply to wages up to $142,800 as of 2021.
That limit could be raised so that workers with income well above that threshold continue to pay into the system.
President Joe Biden has proposed reapplying the Social Security payroll tax for wages above $400,000, in effect creating a donut hole between the current cap and the level at which those payroll taxes would again kick in. Because the limit on payroll taxes is adjusted every year, that gap would eventually close.
Alternatively, the 6.2% contribution rate could be increased.
That rate has not been adjusted in many years, said Martha Shedden, president of the National Association of Registered Social Security Analysts. Even moving it up by just a tenth of a percent or a hundredth of a percent could make a big difference with 176 million workers paying into the system, she said.
“The cumulative effect of 176 million people paying a tiny bit more would have a big impact,” Shedden said.
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How To Estimate Your Social Security Income
Two facts are knownSocial Security benefits are not guaranteed, and some changes will be necessary to keep the system solvent in the future as millions of baby boomers retire and begin to receive their Social Security benefits. While these facts add uncertainty, its also true that the quality of your retirement depends on your planningand you must start planning somewhere.
A good starting point is to figure out the amount of retirement benefits to which all of your years of Social Security contributions entitle you under current law. There are four ways to do this:
How Deep Might The Cuts Be
The current estimate is for a reduction of about $1 for every $4 or so in benefits starting in 2033. “At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76% of scheduled benefits,” the trustees said.
Another way to look at it is by examining how much of a typical retiree’s income will be paid or replaced by Social Security benefits. Pensions, personal savings, perhaps housing equity and other assets make up the rest.
Lower-income people who are more dependent on the program could get hurt worse. On average, they currently rely on Social Security to replace about 56% of what their preretirement income was. That might fall to around 44% with across-the-board cuts, according to a Congressional Research Service analysis. Higher-income earners rely on Social Security to replace 35% of income, and that might fall to around 27%.
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Retiring Early Before 35 Years Of Work History
For those who dont even have 35 years of historical income, though, the effect of retiring early can be even more substantial. For instance, if the individual above had been aiming to retire even earlier, then the reality is that social security early retirement age 55 likely doesnt even have 35 years of earnings history. As a result, the additional projected years of working through full retirement age would both fill out the remainder of the highest 35 years, and replace lower earning years with new higher years. The exclusion of both if retirement occurs early can be substantial.
As the chart above shows, projected Social Security benefits would include 8 more years of $125,000/year earnings to complete the 35-year earnings history, and the subsequent 8 years would further increase AIME by overriding 8 early years that were at lower income levels. As a result, projected Social Security benefits would be $2,854.42/month based on an AIME of $9,885.71/month . However, if the individual actually retires at age 50, and simply locks in the benefits hes actually earned, the 35-year AIME would be only $8,220.24, and Social Security retirement benefits would actually be just $2,606.21/month, not $2,854.42 as projected with continued work!
What Is My Approximate Estimated Social Security Benefit
It is based on information and assumptions provided by you regarding your goals, expectations and financial situation. This service shall not infer that company assumes any fiduciary duties. In addition, such service should not be relied upon as the only source of information. This information is supplied from sources we believe to be reliable but we cannot guarantee its accuracy. These are hypothetical examples for illustrative purposes only, and may not be used to project or predict results.
This is a general communication for informational and educational purposes. The materials and the information are not designed, or intended, to be applicable to any persons individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in a particular course of action. If you are seeking investment advice or recommendations, please contact your financial professional.
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A You Can Continue Working And Start Receiving Your Retirement Benefits
If you start your benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age.
You can get Social Security retirement benefits and work at the same time before your full retirement age. However your benefits will be reduced if you earn more than the yearly earnings limits.
After you reach your full retirement age, we will recalculate your benefit amount to give you credit for any months you did not receive a benefit because of your earnings. We will send you a letter that explains any increase in your benefit amount.
If you delay filing for your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit. If you also continue to work, you will be able to receive your full retirement benefits and any increase resulting from your additional earnings when we recalculate your benefits. Once you reach full retirement age, your earnings do not affect your benefit amount.
If you start receiving retirement benefits before age 65, you are automatically enrolled in Original Medicare when you turn 65. If you or your spouse are still working and covered under an employer-provided group health plan, talk to the personnel office before signing up for Medicare Part B. To learn more, read our Medicare publication.
Whats The Report’s Key Takeaway
Media reports have focused on the pending depletion of the trust fund supporting Social Security retirement benefits. This OASI fund, for Old-Age & Survivors Insurance, is now projected to run out of money in 2033. If including disability benefits, the DI fund, the system could be insolvent by 2034.
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How Should I Decide When To Take Benefits
Consider the following factors as you decide when to take Social Security.
Your cash needs: If youre contemplating early retirement and you have sufficient resources , you can be flexible about when to take Social Security benefits.
If youll need your Social Security benefits to make ends meet, you may have fewer options. If possible, you may want to consider postponing retirement or work part-time until you reach your full retirement ageor even longer so that you can maximize your benefits.
Your life expectancy and break-even age: Taking Social Security early reduces your benefits, but youll also receive monthly checks for a longer period of time. On the other hand, taking Social Security later results in fewer checks during your lifetime, but the credit for waiting means each check will be larger.
At what age will you break even and begin to come out ahead if you delay Social Security? The break-even age depends on the amount of your benefits and the assumptions you use to account for taxes and the opportunity cost of waiting . The SSA has several handy calculators you can use to estimate your own benefits.
If you think youll beat the average life expectancy, then waiting for a larger monthly check might be a good deal. On the other hand, if youre in poor health or have reason to believe you wont beat the average life expectancy, you might decide to take what you can while you can.
A quick note about life expectancy
What Other Actions Can You Take
There are many more possibilities. For example, if your income is low, take a look at the Retirement Saver’s Credit, which provides a modest government retirement match, worth up to $1,000 per person, in the form of a tax credit. If you have access to a Health Savings Account at work, start contributing money. These accounts offer a tax deduction upfront, while withdrawals can be taken tax-free for health costs in retirement.
If you’re already in good shape, with ample money in IRAs or a 401 plan, devise a withdrawal strategy, taking Required Minimum Distributions into account, so that you minimize taxes and avoid a tax bill on some of your Social Security benefits.
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More From Life Changes:
The annual adjustments are based on inflation. So bigger monthly checks mean that consumer prices have also gone up. Consequently, the extra cash may not go as far.
The average monthly retirement benefit will go up by $92 to $1,657 in 2022 from $1,565 in 2021.
But the size of the increase will vary by beneficiary.
“Anybody who is currently in receipt of a benefit should take a look at what their benefit is and imagine what a roughly 5.9% increase will do to that benefit level,” Stephen Goss, chief actuary at the Social Administration, said during a recent webinar hosted by the Bipartisan Policy Center.
However, there is one thing that will offset how large those checks will be: Medicare Part B premiums.
Those payments toward Medicare Part B are often deducted directly from beneficiaries’ monthly checks. However, not everyone has Medicare Part B coverage, particularly if they are still covered under an employer health plan or if they have not yet reached Medicare eligibility age, which is 65.
The standard Medicare Part B premium is projected to be $158.50 per month, up from $148.50 this year. However, the rates for next year have not been officially announced.
If you are not covered by Medicare Part B, you can multiply your monthly benefit amount by 1.059 to approximate your payment for next year, said Joe Elsasser, founder and president of Covisum, a Social Security claiming software company.
Can You Receive Retroactive Payments
Once the SSA approves your SSDI application and calculates your monthly benefit, you may be entitled to a back pay award. How many months of payments you will receive will depend on the date you applied for benefits and your disability onset date.
If you are applying for SSDI benefits, you need the assistance of a skilled Social Security disability lawyer to get your application approved and receive the benefits you deserve. To schedule a free consultation with a member of our legal team, fill out the online form on this page or call our Roswell office today.
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