As we step into the new year, it’s crucial for those nearing retirement to understand a key aspect of their Social Security benefits – the full retirement age. While many associate the age of 65 with retirement, there’s a growing number of Americans retiring earlier at age 62.
However, to maximize Social Security benefits, it’s essential to know the full retirement age, which has gradually increased over the years and is now up to 67 for those born in 1960 or later.
The concept of “full retirement age” isn’t new; it was set in legislation back in 1983 when Congress started gradually raising it from 65 to 67. This increase was to address the rising costs of the Social Security program and ensure its long-term sustainability.
However, the key to understanding how this affects you is knowing when you were born. The “full retirement age” is tied to birth year, which determines the age at which you can begin collecting full benefits without a penalty.
Joel Eskovitz, a senior director for Social Security and savings at the AARP Public Policy Institute, explains, “There’s no specific trigger that happens on January 1st. The full retirement age is based on your birth year.”
What this means is if you were born in 1960 or later, you’ll need to wait until you’re 67 to receive full benefits. This gradual increase was set to spread the financial burden over a longer period, allowing the Social Security fund to remain solvent for future generations.
When Can I Retire and Start Taking Social Security?
You can retire at any age, but you can only start taking Social Security benefits at age 62. At age 59½, you can also begin withdrawing from tax-advantaged retirement savings like 401(k)s and IRAs without incurring a penalty tax from the IRS.
The longer you delay claiming Social Security, the bigger your monthly benefit. The full retirement age is when you receive the maximum Social Security benefits. However, this age depends on your birth year:
- 1955: 66 years and two months
- 1956: 66 years and four months
- 1957: 66 years and six months
- 1958: 66 years and eight months
- 1959: 66 years and 10 months
- 1960 and later: 67 years of age
Putting off claiming Social Security until your full retirement age can increase your monthly benefit by 8% annually until you reach age 70. For example, if you claim Social Security at full retirement age this year, your maximum benefit is $3,822, according to the Social Security Administration. If you retire at 62 and claim, your maximum benefit would be $2,710. However, if you wait until you’re 70 to file for benefits, your maximum would be $4,873.
What is the Social Security 2025 Cost of Living Adjustment (COLA)?
To help retirees’ benefits keep pace with inflation, Social Security typically adds a cost of living adjustment (COLA). For January 2025, Social Security benefits will rise by 2.5%. This adjustment means the average Social Security recipient will see an additional $50 per month, raising the estimated average monthly benefit from $1,927 to $1,976. Couples who jointly receive benefits will see an increase of $75, bringing their estimated average monthly benefit to $3,089.
How Important is Your Full Retirement Age for Social Security?
Opinions vary, but the “real important ages are 62 (the first year of Social Security eligibility) and 70 (the maximum claiming age),” says Gal Wettstein, a senior research economist at the Center for Retirement Research at Boston College. “Every year you delay claiming until you reach 70, your monthly benefit increases.” Many people still consider 65 as a pivotal retirement age because it’s when they become eligible for Medicare.
Will Social Security’s Full Retirement Age Go Up?
Currently, there are no regulations indicating an increase, but it could be considered in the future. The system is in a deficit as less money comes in than goes out, and benefit outlays might be slowed if the program’s full retirement age was increased to 68 years. This could potentially lead recipients to claim a full year later.
Understanding your full retirement age is crucial when planning for retirement. Whether you retire at age 62 or delay benefits until you’re 70, the decision can significantly impact your financial future. It’s important to consider all factors, including your current employment, health, and family history, before making this one-time decision.
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Eliot Pierce is a dedicated writer for ChiefsFocus.com, covering local crime and finance news. With a keen eye for detail and a passion for storytelling, Eliot aims to provide his readers with clear and insightful analysis, helping them navigate the complexities of their financial lives while staying informed about important local events. His commitment to delivering accurate and engaging content makes him a valuable resource for the community.