Many people retire at age 65 to collect full retirement benefits from Social Security. This is when they can begin to receive their monthly checks and also start Medicare Part A, which covers hospitalizations.
Before you reach your full retirement age, however, you can still earn a certain amount without having to pay income tax on Social Security benefits. This amount is based on your highest 35 years of earnings.
Age 65
Age 65 is when you can start collecting Social Security benefits. Most retirees enroll in Medicare at this point — Part A, which covers hospitalizations, hospice care and some home health care, and Part B, which covers doctor visits and preventive services. These Medicare premiums are deducted from Social Security checks.
Social Security benefits are relatively modest by international standards, replacing only about half of a person’s previous earnings. But they do help people avoid poverty in retirement and provide vital insurance protection for children.
Some people can file early at age 62, but doing so will reduce their lifetime benefit by about a third. Americans can also choose to delay their Social Security benefits until age 70, at which point they’ll receive a monthly check that grows by 8% per year for life. Taking this option could help plug a big chunk of the Social Security trust fund’s 75-year deficit, Munnell says. Those who do opt to wait for their full retirement age also get a higher spouse’s survivor benefit.
Age 62
One of the most important decisions you’ll make about retirement is when you’ll start receiving Social Security benefits. You can start them at age 62, though your payments will be permanently reduced if you continue to earn income above a certain level each year (in 2022 it’s $1 in benefits for every $2 earned over the earnings limit of $19,560).
The Social Security Administration uses your highest 35 years of earnings when calculating your monthly retirement benefit. It also adds in a big fat zero for any years you didn’t have any earnings, so the more you earn, the higher your benefit will be.
Many people choose to start Social Security early at age 62 so they can have some guaranteed income in their later years, which could be helpful if they are having trouble making ends meet. However, if you can afford to wait until your full retirement age, you might be better off waiting because your monthly benefit will increase by 8% each year until then.
Age 55
Social Security retirement benefits can be an important piece of your financial puzzle, providing you with monthly income in addition to your other sources of revenue such as qualified retirement accounts, taxable investment accounts or annuities. However, you cannot start receiving Social Security benefits at age 55 because the earliest you can begin taking your benefit is 62, and doing so results in a reduction of your full retirement age (FRA) amount.
FRA is your “replacement rate,” meaning that your Social Security checks will replace about 37 percent of your past earnings. The higher your FRA, the more your checks will be. This is why Congress raised the normal retirement age, and why many people are choosing to retire before their FRA. It’s also why most experts believe that Social Security will run out of money within the next decade or so unless lawmakers make changes. Those changes will have to include raising contributions or cutting benefits, or both.
Age 50
Your benefit is calculated based on your highest 35 years of earnings, which are averaged and then indexed for inflation. Each year you don’t earn is entered as a zero. However, you can replace a zero year by continuing to work or working part-time during retirement.
You can start collecting Social Security as early as age 62, though doing so reduces your monthly payments. You can also wait until your full retirement age or even 70, which yields higher benefits.
Married couples have more options when it comes to claiming Social Security. You can receive a spousal benefit equal to 50% of the higher-earning spouse’s payment. You can delay receiving these spousal payments to earn delayed retirement credits that increase your base payment by 8% per year until you reach your full retirement age. You can get an estimate of your future benefits by creating a my Social Security account. This estimate is only an approximation, but it can help you budget for retirement.
