Preparing for retirement involves a great deal of financial planning. If you are considering when you should retire and how your age may impact your Social Security benefits, it’s important you understand the options available to you.
Eligible Ages for Retirement Benefits
The Social Security Administration awards a certain percentage of retirement benefits according to the age at which you retire:
- Early retirement age. When beneficiaries retire before the full, or normal, retirement age, their benefit amount is reduced by a graduating fraction in order to help their benefits last longer throughout their retirement. For example, if the normal retirement age is 65 and you elect to retire at 62, your monthly benefit will be reduced by 20% of amount you would receive at 65.
- Normal retirement age. The normal retirement age depends on an individual’s year of birth and is also dependent on changes to Social Security policies over time. Currently, retirees born before 1943 can receive a full benefit amount at age 65. Those born after 1943 and before 1960 must be 66, and anyone born after 1960 must be 67.
- Late retirement age. Delaying retirement payments until the age of 70 is considered late retirement and allows you to earn extra retirement credits that increase your monthly benefit once payments begin. The percentage of credit you receive for each year you delay retirement depends on your year of birth.
Even though the normal retirement age may shift, early and late retirement ages remain the same. Early retirees must be 62 years old for an entire month before claiming benefits. Additionally, the fraction by which decreases due to early retirement occur will reduce the closer you are to full retirement age.
The exact date of your birth can impact how your retirement age is factored. If your birthday is January 1st, you refer to the previous year’s retirement rules. If your birthday is the 1st of a month, your benefits are calculated by using the previous month.
Late retirement credits are not given beyond the age of 69, and retirement benefit will not increase even if you work past the age of 70. The Social Security Administration provides a calculator on its site for recipients to view a chart that shows the effects that delaying their benefits can have on their total benefit amount.
Understanding Social Security File and Suspend
Originally, the benefits of filing for retirement benefits and suspending payment helped beneficiaries of an eligible age allow their spouses to receive a spousal benefit payment without collecting payments from the primary benefit account. This meant that a retiree could still accrue credits for delayed retirement, thus increasing their future payment amount, while their spouse received dependent benefits.
The Social Security Administration now requires the primary beneficiary to file and collect payment before a spousal benefit can be given unless they meet strict rules for a “deemed filing” status. If the primary beneficiary is caring for a disabled child under the age of 16 or if the primary beneficiary is receiving Social Security disability insurance (SSDI) payments, their spouse can receive a spousal benefit while the primary beneficiary delays their retirement benefit.
Delaying retirement benefits does not delay eligibility for Medicare. Retirees who choose to delay their Social Security benefits should still enroll in Medicare within three months of turning 65 or they may risk paying a higher premium for Part B or Part D Prescription Drug Plan benefits.