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.
Should I Delay My Retirement
Many people are anxious to start social security before it’s entirely tapped out. They will likely opt for early retirement benefits. What those people may not understand is that there is a significant financial bonus waiting for those who delay retirement.;
How To Receive Federal Benefits
To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.
If You Have a Bank or Credit Union Account:;
If You Dont have a Bank or Credit Union Account:;
- Direct Express debit card;- a pre-paid debit card. Get help by calling the Go Direct Helpline at .;
Make Changes to an Existing Direct Deposit Account:
What Is My Full Retirement Age
Full retirement age for future beneficiaries will fall between the ages of 66 and 67. This is the age at which you can expect a full, unreduced benefit from Social Security. If you delay filing for benefits until after your full retirement age, you can expect a benefits increase of up to 8% per year until you reach age 70.
How Does The Social Security Program Work
Collectively, the money paid into Social Security is delivered to qualified recipients, including retirees, those qualifying as disabled, a surviving spouse and dependents of beneficiaries. Unlike some retirement accounts such as a 401, Social Security isnt held in a personal account in your name. Instead, the total amount of money paid into Social Security is pooled together to pay current benefit recipients with leftover funds placed in the Social Security trust fund set to pay up-and-coming retirees once theyre eligible.
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Dont Just Hope Everything Will Still Work Out Get Proactive And Plan Now
Many people just hope everything will work out in retirement. Sometimes it does, but sometimes a lack of planning can ruin what should be your best years. This is your retirement! Please continue to stay informed. You should start by getting your FREE copy of my Social Security Cheat Sheet. This is where I took the most important stuff from the 100,000 page website and condensed it down to just ONE PAGE! Get your FREE copy here.
If you still have questions, you could leave a comment below, but what may be an even greater help is to join my. Its very active and has some really smart people who love to answer any questions you may have about Social Security. From time to time Ill even drop in to add my thoughts, too.;
You should also consider joining the 274,000+ subscribers on my YouTube channel! For visual learners , this is where I break down the complex rules and help you figure out how to use them to your advantage.
One last thing: There is a tremendous amount of misinformation out there about the changes in 2021. Help me clear up the confusion by sharing this article on Facebook. Thanks!
The Full Retirement Age For Social Security
The full retirement age or normal retirement age in the U.S. ranges from 65 to 67, depending on your year of birth.
Is it possible to get your benefits before then? Yes. The earliest you can begin claiming Social Security benefits is age 62, but there is a catch: By claiming early, youll get a reduced monthly benefit. For someone whose full retirement age is 67, starting benefits at age 62 means taking a nearly 30% monthly hit.
On the flip side, if that person waits until age 67 to draw benefits, theyd get 100%. From there, it gets better; if they can hold off until 70, their monthly take could increase by as much as 8% a year.
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If You Want To Invest The Cash
Nowhere does it say you’re required to spend the money you get from Social Security. You can invest it in stocks, bonds, real estate or whatever.
One investment-related thing you cannot do with Social Security money is count it as “earned income” to qualify for contributions to an IRA. However, you can still invest via a regular taxable account. Just remember that in the short term, some investments can be very volatile and not appropriate for any cash you know you’ll need in the near term . Weigh that against the guaranteed return you would get on your money by waiting to file and amassing more delayed retirement credits.
» FURTHER READING:5 steps to retirement planning
What To Consider Before Filing For Social Security
A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.
But heres the key tradeoff: you can file early and take a reduced benefit, expecting that a shorter lifespan will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.
Social Security is like longevity insurance, says Brent Neiser, a certified financial planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.
Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.
You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.
Bridge To Medicare At Age 65
Remember that while you are eligible for reduced Social Security benefits at 62, you won’t be eligible for Medicare until age 65, so you will probably have to pay for private health insurance in the meantime. That can eat up a large chunk of your Social Security payments.
Read Viewpoints on Fidelity.com: Your bridge to Medicare
Gaining Back The Reduction In Benefits From Working
The amounts of early retirement benefits you lose as a setoff against your earnings are not necessarily gone forever. When you reach full retirement age, Social Security will recalculate upward the amount of your benefits to take into account the amounts you lost because of the earned income rule. The lost amounts will be made up only partially, however, a little bit each year. It will take up to 15 years to completely recoup your lost benefits. And remember, none of this readjustment will change the permanent percentage reduction in your benefits that was calculated when you claimed early retirement benefits .
Change In How You Report Earnings
The Social Security Administration bases its benefit calculations on earnings reported on W-2 forms and on self-employment tax payments. Most individuals are not required to send in an estimate of earnings.
However, the Social Security Administration does request earnings estimates from some recipients: those with substantial self-employment income or those whose reported earnings have varied widely from month to month, including people who work on commission. Toward the end of each year, Social Security sends those people a form asking for an earnings estimate for the following year. The agency uses the information to calculate benefits for the first months of the following year. It will then adjust the amounts, if necessary, after it receives actual W-2 or self-employment tax information in the current year.
Once a beneficiary reaches full retirement age, his or her income will no longer be checked. Because there is no Social Security limit on how much a person can earn after reaching full retirement age, there is nothing to report.
Congress Must Act Sooner Rather Than Later
In theory, the AWI problem could be fixed anytime before 2022, when, for example, workers who turn 60 this year are first eligible to retire at the age of 62. But that delay would cause significant anxiety for these workers, whose future benefits would be at risk. Moreover, people decide when to retire based on projections of their incomes in their initial year of retirement and in the remainder of their lives. It would be most unfair to workers decision-making processes to have the expectations of their future incomes be uncertain for some period of time while they are trying to make such an important decision.
Congress needs to act sooner rather than later to ameliorate this problem. One possibility would be to include a fix in the stimulus legislation to cope with the economic effects of the COVID-19 pandemic that Congress is currently considering.
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When Should You Start Social Security
The Social Security Administration does not have a recommended age to start receiving benefits. The decision is entirely up to you. Youll get a little bit less if you start early, or a bigger benefit if you wait until 70. You can calculate the difference on the SSA website.;You may receive a bigger payout over your lifetime if you wait, but that might not be as important as receiving income now, especially if you can no longer work for health reasons. Ultimately, the right age depends on your financial situation, your work, and your health.
What Is The Future Of Social Security
If youre skeptical about the;future of Social Security;or wary of potential changes such as means testingwhich could reduce or eliminate benefits for the wealthy, or an increase in the full retirement ageyou may be tempted to start benefits early, under the assumption that its better to have something than nothing.;The;2020 annual report;from the Social Security Trustees, released in April, projects that the Social Security Trust Fund has enough resources to cover all promised retirement benefits until;2035,;and will cover 79% of scheduled benefits for new retirees thereafter without changing the current system. The 2020 report does not include an adjusted projection due to impacts, if any, from the pandemic.
Over the longer term, changes such as later benefit dates or means testing may be considered.
In any situation, if youre particularly concerned about the future prospects for Social Security, thats a good reason to save more, and earlier, for your retirement.
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Full Retirement Age Affects The Amount Of Your Benefits And More
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.;
Whether You’re Still Working
Once you reach your full retirement age, you can continue to work and still get your full Social Security benefits penalty-free. Individuals under full retirement age for the entire year who have already begun claiming benefits and earn over the annual limit will be penalized with a $1 deduction from their benefit payment for every $2 earned above that limit . You’ll still get credit for those earnings, and the SSA will recalculate your benefit once you reach full retirement age.
» CALCULATOR: How much money will you need to retire at 67?
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How The 2021 Changes Will Affect Social Security Benefits
Heres how this changes the benefits and reductions if we look at filing at the earliest age and at the latest age.;
Currently, the SS filing window is between 62 and 70. You cant file before 62 and it doesnt make sense to file after 70.;
So, for those born between 1943 and 1954, the FRA is 66, you are entitled to 100% of your benefit.
You can file as early as 62, but youll only receive 75% of your benefit. If you file at 70 youll receive 132% of your benefit. Once the FRA starts moving up, it all changes.
Youll still be able to file at 62, but youll only receive 70% of your FRA and if you delayyour benefit will increase to 124% instead of 132%.;
Options For Early Retirement
Social Security retirement benefits are actually available as early as age 62, but with a slight caveat. The SSA considers your FRA to be the “normal” retirement age; filing for retirement benefits during any year from when you reach age 62 to the year before you reach your FRA is considered “early” retirement. If you choose to collect your benefit earlier than your FRA, you also opt for a permanently reduced benefit in exchange for starting to collect it early, meaning you’ll see a smaller check each month.
There may be reasons that retiring early is the smart choice. For instance, you might have another retirement savings account to make up for the lower monthly benefit check; you may be able to afford to retire without the SSA benefit altogether.
Your benefits increase for every month you do not begin receiving them after age 66. When you reach 70, they stop increasing. There is no reason to not start your benefits after you turn 70.
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What If I Delay Taking My Benefits
If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement”;credit . For example, say you were born in 1951 and your full retirement age is 66. ;If you started your benefits at age 68, you would receive a credit of 8% per year multiplied by two . This makes your benefit 16% higher than the amount you would have received at age 66.;.
That higher baseline lasts for the rest of your retirement, and serves as the basis for future increases linked to inflation. While its important to consider your personal circumstancesits not always possible to wait, particularly if you are in poor health or cant afford to delaythe benefits of waiting can be significant.
If you decide to wait past age 65, you may still need to sign up for Medicare.; In some circumstancesyour Medicare coverage may be delayed and cost more if you do not sign up at age 65.
To review your situation, your annual Social Security statement will list your projected benefits at age 62, full retirement age, and age 70,;assuming you continue to work and earn about the same amount until age 62, full retirement age, or age 70 before retiring. If you need a copy of your annual statement, you can request one from the Social Security Administration .