Tired of the daily grind at work and looking forward to the day you can retire and start checking things off your bucket list? Or are you one of the lucky people who love your job so much you never want to leave? In either case, you will probably have to start thinking about retirement planning at some point.
For most people in the United States, serious thoughts of retirement begin when they are in their 60s and close to the age of eligibility for Social Security (SS) retirement benefits. Some opt to begin receiving reduced benefits as soon as they are eligible at age 62, and others hold out until later so they can get full or increased benefits.
Everyone has their own personal reasons for choosing the age they begin collecting their benefits, but it is imperative that you consider all your options before you decide when to retire. In order to make a well-informed decision you need the facts about your full retirement age and how much your benefits go up, depending on when you stop working.
What is Full Retirement Age?
Full, or normal retirement age, is the age that the Social Security Administration (SSA) says you are eligible to receive 100 percent of your retirement benefits. If you choose to receive benefits before reaching your full retirement age, the SSA calls this early retirement. Every person in the United States that has fulfilled the minimum of 40 credits of SS, is eligible for early retirement beginning at age 62, but the amount of benefits is reduced proportionately to the age you retire.
As of 2019, full retirement age is 66 if you were born between the years of 1943 and 1954. If you were born in 1955, full retirement begins at 66 years and two months. Here’s a list of what full retirement age is based on the year you were born:
1956: 66 + 4 months
1957: 66 + 6 months
1958: 66 + 8 months
1959: 66 + 10 months
And finally, for people born in 1960 and later, full retirement age is 67 years old.
The SSA bases the age of normal retirement on life expectancy statistics in the United States. As life expectancy rises, so does the age limit for full retirement.
No matter when you choose to begin receiving your benefits, you are eligible to enroll in Medicare when you reach the age of 65. It may be to your best advantage to apply at 65 even if you are still employed and not collecting benefits.
Do Retirement Benefits Increase Every Year You Wait?
Opting for delayed retirement means that your benefits go up for each year you wait. If you were born in 1954, you will be 66 years old in 2020 and have reached your full retirement age. This means that you get 100 percent of your benefit amount.
The SSA determines your full benefit amount by calculating your average indexed monthly earnings from all your working years. They use this average to find your primary insurance amount through specific calculations.
If you delay receiving benefits, the amount you get increases approximately 6 to 7 percent per month. For example, if you are 66 years and 1 month old, you get 100.7 percent of your full retirement amount. Let’s take a look at how this amount increases by month:
66 + 5 months = 103.3 percent
66 + 10 months = 106.7 percent
67 years old = 108 percent
67 + 6 months = 112.0 percent
68 years old = 116 percent
68 + 6 months = 120 percent
69 years old = 124 percent
And finally, at 70 years old you receive 132 percent of your full retirement benefit. After this age there are no more increases.
Personal retirement planning is just that, personal. Everyone has different needs and plans, and you must consider what is best for you, your family, and your future when deciding whether to retire early, or to wait. If you are concerned about your options, you can meet with a Social Security Administration agent to discuss all the details.