Many people decide when they want to retire based on the age requirements to retire via the Social Security system. The amount of Social Security benefit received each month is based on the age of a person when they retire and whether they continue to work after they reach retirement age.
There are two key parts to retirement and estate planning:
- Retirement needs - How much money will you need after retirement and what will be the source of that income?
- Estate needs - It is important to plan if you want to have money left after you die to pass on to your family, friends, organizations or charities. You need to make sure that your estate and financial planning includes a careful look at the various sources of income you will have during your retirement years as well as your planned expenditures.
Social Security benefits are usually only a part of the total retirement benefits and income that a retiree will receive. Savings, investments, annuities and pensions are also important sources of income after retirement.
Social Security Retirement Benefits
Not everyone is eligible to receive Social Security benefits. In order to qualify for Social Security:
- You need to have earned a specific amount of money each quarter.
- Taxes need to have been paid in your name into the Social Security Administration. Your employer probably paid the tax if you worked full-time. You paid the tax if you were self-employed or if you worked and earned over a specific amount during the year. If you worked for the Federal or state government your entire life, you may not be eligible for Social Security benefits because your employer paid into a pension fund instead of paying taxes to Social Security.
|Year of Birth||Full Retirement Age|
|1937 or earlier||65|
|1938||65 and 2 months|
|1939||65 and 4 months|
|1940||65 and 6 months|
|1941||65 and 8 months|
|1942||65 and 10 months|
|1955||66 and 2 months|
|1956||66 and 4 months|
|1957||66 and 6 months|
|1958||66 and 8 months|
|1959||66 and 10 months|
|1960 or later||67|
When you get ready to retire, the actual amount of your Social Security benefit is based on four factors:
- Lifetime earnings - The more you have earned, the greater the benefit.
- Starting age to receive benefits - You can apply to receive benefits starting at age 62. The longer you wait after age 62, the more benefit you will be paid.
- Working after retirement - Your benefit can be reduced if you continue working after you start receiving Social Security benefits.
- Year of birth - The Social Security law has been revised multiple times. The revisions are implemented based on the year of birth of the retiree.
Age Requirements to Retire Via the Social Security System
You can decide to retire at any age. However, your age at retirement can play a major role in the amount of Social Security benefit you receive. For example:
- You are not eligible to receive Social Security benefits until age 62.
- The year you were born determines whether you can receive full benefits at age 65 or if you have to wait until you are 66 or 67. This is called your "Full Retirement Age".
- Your benefits will be permanently reduced if you retire before your "Full Retirement Age".
- The year you were born determines how much extra you can earn in benefits if you delay retirement.
Full Retirement Age Benefits
You can earn your full Social Security benefits at age 65 if you were born in 1937 or before.If you were born after 1937, you cannot earn full Social Security benefits until you have reached a specific birthday and have waited a certain number of additional months to qualify.
For example, if you were born between 1943 and 1954 you have to wait until you are 66. You will have to wait until you are age 67 to receive full benefits if you were born in 1960 or later.
You can start receiving your Social Security benefits at any month between age 62 and your "Full Retirement Age". The amount of your benefits will be reduced and will stay reduced even when you reach your "Full Retirement Age".
The reduction is based on how early you started receiving benefits before your "Full Retirement Age". The earlier you start, the more your benefit is reduced.
|Retirement Age||Benefits Reduction|
|64||6 2/3 %|
|Retirement Age||Benefits Reduction|
Receiving Retirement Benefits While You Work
You can decide to work while you receive your monthly Social Security benefits. This can have two results:
- You might earn a higher benefit - Social Security benefits are based on the amount you earn during your lifetime. Social Security will review your records every year and notify you if you quality for an increase in your benefits.
- Your benefit might be reduced - Your benefit amount will be reduced if you receive benefits before reaching your "Full Retirement Age":
- In the year you reach "Full Retirement Age" - $1 in benefits will be deducted for each $4 you earn above the annual limit ($34,440 in 2007) until the month you reach your "Full Retirement Age". After that, your benefits will not be reduced, no matter how much you earn.
- In the years before you reach "Full Retirement Age" - $1 in benefits will be deducted for each $2 you earn above the limit ($12.940 in 2007).
- In or after the month you reach "Full Retirement Age"- Your benefits will not be reduced.
|Year of Birth||Yearly Increase Rate|
|1943 or later||8.0%|
Some people decide to keep working after their "Full Retirement Age" and to delay applying for Social Security benefits. You will earn a larger benefit if you delay applying for benefits. Your benefit will be increased by 6.5-8.0 percent annually based your year of birth.
For More Information
The information about the age requirements to retire via the Social Security system is very detailed and can be very confusing. The Social Security Administration provides several ways to receive information. Their website and publications can help you understand what the impact will be on benefits based on the decisions you make before and after your retirement:
- Social Security - Links to Social Security program information, online benefit calculators and applications for Social Security benefits
- Social Security Electronic Publications - Download copies of Social Security booklets such as:
- Retirement Benefits (Publication No. 05-10035)
- Your Retirement Benefit: How It Is Figured (Publication No. 05-10070)
- How Work Affects Your Benefits (Publication No. 05-10069>)