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What Is Retirement Age For Social Security Benefits

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How Do I Know My Full Retirement Age For Social Security

What is the Full Retirement Age for Social Security?

Most Americans expect to retire at age 66 or older, according to Gallup. However, the average age of Americans currently retired is 61. This is years away from the Social Security Administrations definition of full retirement age.

According to a study by GOBankingRates, several Americans were unsure at what age they can begin collecting Social Security benefits. 30% of respondents answered this question correctly, which is at age 62 for those who choose early retirement.

Benefits are based upon full retirement age. The retirement age for Social Security depends on the year in which you were born.

If you were born in 1955-1959 the so-called gap years your full retirement age increases by two months per year. This would, for example, raise the exact Social Security retirement age to 66 years and 10 months if you were born in 1959.

Use the Social Security Administrations retirement calculator to figure out your exact Social Security retirement age for full benefits.

Watch Out For Hidden Costs

Youll also want to consider other lifestyle factors, especially Medicare. Americans become eligible for federal health insurance coverage at age 65, well after when you can begin to file for Social Security.

If you stop working at age 62 and lose health insurance, you have to get supplemental insurance to bridge the gap until you turn 65 and Medicare kicks in, Neiser says.

If you work during retirement, you have another incentive to delay collecting Social Security. Earning too much at a job after you begin collecting your benefit can reduce your payout, but only if you have yet to hit full retirement age.

However, when you hit full retirement age, your benefit will increase to account for any benefit that was withheld earlier due to working. Heres how much you can earn and not get hit.

If youre younger than full retirement age for all of 2021, the Social Security Administration will deduct $1 of your monthly check for every $2 you earn above $18,960 per year.

If you reach full retirement age in 2021, the administration deducts $1 of your monthly check for every $3 you earn above $50,520 until the month you reach retirement age.

Youll also owe Social Security and Medicare tax on your earnings, even if youre already receiving benefits.

So those are some potential pitfalls to claiming Social Security early.

Claiming Social Security At Age 70

If you are able to delay claiming your Social Security benefit until you reach age 70, you will earn a significantly higher benefit. After your Full Retirement Age of 66 , your benefit goes up by eight percent each year. Consequently, if your full retirement benefit at age 66 was $1,000 per month, and you delay claiming your benefit, it will be $1,080 per month by age 67 or an additional $960 per year. If you delay until age 70, it will be 124 percent of your expected benefit or $1,240 a month. That comes out to $2,880 more each year.

Delaying past age 70 will not increase your benefit, however.

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How To Plan For Future Benefits

In 2000, the average age at which people retired was roughly 61 or 62. Two decades later, it’s around 66, according to government data, Warshawsky said.

“Just in 20 years, we’ve seen a substantial increase in the retirement age,” Warshawsky said. “People really, really are working longer.”

Anecdotally, Elsasser said he sees more people retiring earlier than they had anticipated as their work prospects change.

That highlights the importance of planning ahead, so you anticipate whatever your retirement years bring. Admittedly, that can be tricky, given that Social Security could be susceptible to change.

If you’re 60 and up, there is less reason to worry any prospective changes would affect your benefits, Elsasser said.

But if you’re 45 to 60 years old, it’s reasonable to plan for benefit reductions of about 5%, he said. For those who are even younger, a 10% to 15% cut is possible.

Moreover, people of all ages should also plan for worst-case scenarios in which the program does reach a point where it can only pay a portion of benefits, which may prompt as much as a 24% benefit cut for retirees.

“The real importance of planning is just making sure you have all your bases covered,” Elsasser said.

You Want To Start A Business

Social Security Guide

Some people think of retirement as a time to relax, but you might see it as an opportunity to do things you couldnt do before, such as starting your own business. For example, you might have put off starting a business before because you were afraid you wouldnt be generating enough income. Social Security benefits could provide enough income to let you launch your business. And if your business is successful, the income it generates could be more than enough to offset the future reduction in benefits.

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Your May Have To Pay Taxes On Social Security Benefits

Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don’t realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.

It doesn’t take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.

Timing And Your Health Coverage

Your health insurance coverage can also play a role in deciding when to claim Social Security benefits. Do you have a health savings account to which you would like to keep contributing? If so, note that if youre age 65 or older, then receiving Social Security benefits requires you to sign up for Medicare Part A, and once you sign up for Medicare Part A, youll no longer be allowed to add funds to your HSA.

The SSA also cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D.

In 2022, the average monthly premium for Part D will be $33 per month versus $31.47 in 2021. If you enroll in a Medicare Advantage plan, the average monthly premium will be $19 per month in 2022 versus $21.22 in 2021. However, if you are still receiving health insurance from your or your spouses employer, you might not yet have to enroll in Medicare.

As of Oct. 16, 2021, Social Security offices are only open by appointment, and to get an appointment you need to be in a limited, critical situation. Most people will have to transact their business online, by phone, or through the mail.

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Determining Your Full Retirement Age

When the Social Security Act was passed in 1935, it established 65 as the retirement age. In 1940the first year in which retirement benefits were available only 53.9 percent of men and 60.6 percent of women lived to be 65. A man who reached this milestone had an average of 12.7 more years to live, while a 65-year-old woman in 1940 had an average remaining lifespan of 14.7 years. By 1990, 72.3 percent of men and 83.6 percent of women survived to 65, with an average remaining lifespan of between 15 and 20 years.

Recognizing that lifespan was going to continue to rise, and that Social Securitys solvency was at risk, Congress passed legislation in 1983 that raised the existing full retirement age from 65 to 67. The adjustment began right away: People who turned 65 in 1984 didnt reach full retirement age until they were 65 and two months. An additional two months of waiting time was added to every subsequent birth year, with an exception for Baby Boomers born between 1943 and 1954. Everyone in this group had their FRA set at 66 years old.

For people born later in the 1950s, the full retirement age ranges from 66 and two months to 66 and 10 months . For anyone born in 1960 or after, the full retirement age is 67. Note that anyone born on January 1st should use the prior birth year to determine full retirement age. Someone with a birthdate of 1/1/60 will reach full retirement age at 66 and 10 months, while someone born on 1/2/60 has an FRA of 67.

You Already Have Your 35 Highest

What Is My Full Retirement Age?

Your Social Security benefits are based on your earnings in the 35 years that you had the most compensation. If youre in your peak earning years, you could boost your benefits if you keep working a few more years and delaying your benefits. However, if you arent going to increase your average earnings, such as if youre only working part-time or youve had to retire early, you wont miss out on the chance to boost your benefits with higher earning years. However, youll still receive a smaller benefit for not waiting until full retirement age.

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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.

No More File And Suspend

Note that the claiming strategy called file and suspend, which allowed married couples who have reached their FRA to receive spousal benefits and delayed retirement credits at the same time, ended as of May 1, 2016. However, spouses born before Jan. 2, 1954, who have attained their FRA may still be able to file a restricted application. It allows them to claim spousal benefits while delaying their own benefits up to age 70.

Social Security benefits can be taxable if your combined income is high enough.

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You Have A Shorter Life Expectancy

The government incentivizes waiting to collect your Social Security benefits by giving you a larger monthly amount the longer you delay. For example, if you start collecting benefits at age 62 when your full retirement age is 66, your monthly benefit will be about 75% of your full-age benefit. So if you expected your monthly benefit to be $1,000 per month at 66, you would only receive around $750 at 62.

Although a larger monthly benefit might sound great, keep in mind that youd have to wait four years to get that extra $250 per month. You would receive $36,000 during those four years at the reduced amount of $750 per month.

When you start collecting $1,000 at age 66, that extra $250 per month wont let you break even for 12 years compared to collecting early. If your health is declining and you dont expect to live until youre 78, youll receive more in benefits during your lifetime if you start claiming as soon as possible.

You Need To Pay Down Debt

8 Things Everyone Wants to Know About Social Security

There are some debts you need to tackle before you retire. If you have high-interest debt, claiming Social Security early can help you pay the debt down. Depending on the interest rate youre paying, the 8% yearly boost to your benefits that you receive for each year you wait past full retirement age might not be worth the increased monthly benefit. Using the early benefits to reduce or eliminate your debt earlier could mean youll be able to keep more of your benefits in the future.

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If You Were Born In 1955 Your Full Retirement Age Is 66 And 2 Months

If you start receiving benefits at age 66 and 2 months you get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your monthly benefit continues to increase.

The chart below explains how delayed retirement affects your benefit. The increase is based on your date of birth and the number of months you delay the start of your retirement benefits. If you start receiving retirement benefits at age:

  • 67, you’ll get 106.7 percent of the monthly benefit because you delayed getting benefits for 10 months.
  • 70, you’ll get 130.7 percent of the monthly benefit because you delayed getting benefits for 46 months.

When you reach age 70, your monthly benefit stops increasing even if you continue to delay taking benefits.

Tax Considerations For Social Security Benefits

How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.

You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.

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Planning Around Your Full Retirement Age

Social Security planning should start long before you reach full retirement age. Talk to your financial advisor about when you hope to retire, and how those plans will affect your benefits. Your full retirement age will always be a factor in Social Security planning the FRA comes up in a lot of Social Securitys many rules.

For example: If you plan to claim benefits and keep working before reaching full retirement age, and you earn above a set earnings cap, your benefit will be reduced by $1 for every $2 you earn above the cap. In the year of your retirement, the benefit will be reduced $1 for every $3 you earn above the limit. Thats going to be an important consideration as you budget for your early- to mid-60s. If your spouse plans to claim spousal benefits, their full retirement age will also affect their benefit amount, so that should be another part of the discussion with your financial advisor.Sachetta, LLCs advisors can help you navigate your options around Social Security. Even if your full retirement age is years away, we recommend you start Social Security planning now. Understanding how your FRA affects your earnings is a critical part of maximizing your retirement benefits. Contact us today.

Know Your Social Security Full Retirement Age

The Full Retirement Age for Social Security Answered

First things first:Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. If your birthday falls between 1955 and 1959, it gradually climbs to 67. If you are born in 1960 or later, your full retirement age is 67.

You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.

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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 you’re contemplating early retirement and you have sufficient resources , you can be flexible about when to take Social Security benefits.

If you’ll 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 you’ll 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 you’ll beat the average life expectancy, then waiting for a larger monthly check might be a good deal. On the other hand, if you’re in poor health or have reason to believe you won’t beat the average life expectancy, you might decide to take what you can while you can.

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