How Your Retirement Age Impacts Your Social Security Benefits

To maximize your Social Security income, you must meet the Social Security retirement age.

After a long career of paying into Social Security, you might be wondering at what age can you retire and start collecting the money you paid into the fund. Depending on the year you were born and when you choose to retire, the amount of Social Security you collect could be impacted. Here’s how your retirement age impacts your Social Security benefits.

What Is the Social Security Retirement Age?

The answer to the question, “what is full retirement age?” depends on your birth year. If you were born before 1938, your full retirement age, also known as the Social Security retirement age, is 65 years old. The Social Security full retirement age goes up by two months for each year after that until 1943, when it hits 66 years old. It remains at 66 for people born from 1943 to 1954 and goes up by two months each year until 1960. If you were born in 1960 or later, your full retirement age is 67 years old. You can use the SSA’s retirement age calculator to find your full retirement age.

Social Security Early Retirement Age

The Social Security Administration sets the early retirement age — the youngest age that you can start collecting Social Security — at 62 years old. However, if you take benefits before your full retirement age — which ranges from 65 years old to 67 years old depending on the year you were born — your monthly benefit will be reduced.

Related: 5 Ways Early Retirement Can Actually Boost Your Social Security

How Collecting Social Security Early Affects Your Benefits

If you start collecting Social Security benefits before your full retirement age, your benefits will be reduced depending on how early you claim them. If your full retirement age is 65 and you start receiving Social Security benefits at age 62, your monthly benefit will be decreased by 20 percent, according to the SSA.

If your full retirement age is 67 and you start collecting Social Security at 62, your monthly benefit will be reduced by approximately 30 percent. To determine how your benefits will be reduced if you claim your benefits early, check out the SSA table that shows how retirement age affects retirement benefits.

How Delayed Retirement Affects Social Security

If you retire at your full retirement age, you’ll avoid a monthly benefits reduction; if you delay retiring past your full age, you’ll increase your monthly benefits. Each year you delay receiving benefits increases your monthly benefit. The size of the increase ranges from 5.5 percent per year if you were born in 1933 or 1934 up to 8 percent per year if you were born in 1943 or later. However, you don’t get any extra money for delaying benefits beyond the age of 70.

If you’re able to delay taking your benefits until your full retirement age, make sure you still sign up for Medicare when you turn 65. If you don’t sign up then, it can increase your costs, according to the SSA.

See: 21 Questions to Ask Yourself Before Deciding to Retire

How Earnings Affect Social Security

The amount of your monthly Social Security benefit also depends on how much you’ve paid in Social Security taxes over the years. The SSA averages your 35 highest earning years to calculate your benefit.

If you don’t have earnings for 35 years, the SSA uses $0 for each year without them. As a result, continuing to work for a few more years could increase your benefit by delaying the age at which you start taking your Social Security and enable you to replace low-earning years with higher-earning ones.

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When to Take Your Social Security Benefits

There’s no such thing as a “normal retirement age” — everyone has different life plans. Your financial and personal circumstances can help you determine when you can retire. Though taking money early might sound tempting, if you’re working, your earnings might reduce your Social Security benefits until you reach full retirement age. The amount your earnings could reduce your benefits is based on how much your earnings exceed the annual limit. For example, in 2017, the annual limit is $16,920; if you’re younger than your full retirement age, your benefits will be reduced by $1 for every $2 your earnings exceed the limit.

You might also want to delay your benefits if you’re in good health or have a family history of living a long time. But if you’re in poor health, consider taking your benefits sooner. For example, even if your benefit decreases by 20 percent because you collect your money a few years early, if you live only a few more years, you’ll receive more because you took the smaller amount sooner.

Analyze Your Social Security Benefits

Deciding when to collect your Social Security is an important financial decision. If you’re not sure what works best for you, consider talking to a financial advisor for guidance. When you’re ready to apply, do your homework and get everything to which you’re entitled.

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