Retired affectionate couple in their kitchen.

Understanding Your Social Security Retirement Age

Sarah Li Cain4-minute read
September 21, 2020

Retiring in the United States can seem like a struggle for many folks. According to the Federal Reserve, a quarter of those who aren’t retiring yet don’t have any form of retirement savings, including 13 % who are at least 60 years old.

Considering Social Security’s full retirement age is higher, it can be a struggle for many if their financial planning isn’t on track. Equipping yourself with information on how to plan for retirement can help you to make smarter decisions for your future.

What Does ‘Full Retirement Age’ Mean?

According to the U.S. Census Bureau Data, the average retirement age in the USA is 63 for women and 65 for men. Technically, when you reach 62 years old, you’re considered the age of retirement and can start to receive Social Security benefits.

Full retirement age is also a term that the Social Security Administration uses to determine when you’ll get your “full” benefits — it’s what many people might think of as a normal retirement age. You can qualify for benefits before your Social Security full retirement age, but you’ll receive a reduced benefit if you claim them (it can go down to 70 percent).

What Is The Social Security Retirement Age?

The full benefit age for retirees is no longer 65. According to the Social Security Administration, the current social security retirement age in the United States has gradually increased for people born after 1938—those who were born after 1943 can access their full retirement benefits at age 66, and those born after 1960 can gain access at 67.

The U.S. government has raised the Social Security full retirement age because of cited improvements in the health of older Americans, as well as higher life expectancies. Since the program started paying out benefits, the average life expectancy has gone up to 84.3 for men and 86.6 for women.

Why Is It Important to Know Your Social Security Retirement Age?

Understanding your retirement age and what your full benefits would look like can shape the financial decisions you once you’re retired.

For example, if you claim Social Security benefits before your FRA, you’ll receive a reduced benefit, so you’ll have to account for the loss in income. Don’t forget survivorship benefits. If you wait until FRA to claim benefits, it could increase the amount your spouse will receive should you pass away before them, and vice versa.

For folks who plan to go into semi-retirement first and work after collecting social security benefits, be aware that the government imposes an annual earnings limit. So if you go over, you’ll also receive fewer benefits. If you reached FRA, then there is no income cap and you’ll receive full benefits.

What Are Social Security Benefits?

Social Security benefits fall into four main categories: disability, dependents, retirement and survivors benefits. It also includes benefits like Medicare, a federal health insurance program for those 65 and older.

In terms of retirement, the money you paid towards Social Security taxes will be returned to you in monthly benefits when you retire as well as your family once you pass away.

To qualify for retirement benefits, you’ll need to accumulate 40 credits or 10 years of work. Then you can choose to claim them once you’ve reached age 62. How much you receive will depend on how much income you earned during your working years, or eligible lifetime average earnings. It also depends on when you start claiming benefits.

Drilling it down further, Social Security benefits are based on average earnings over your lifetime and are adjusted to account for average wages. The SSA will use that to calculate the 35 years where you earned the most then apply a formula to derive your “primary insurance amount,” or basic benefit.

The SSA mails annual benefit statements, which should include an estimate of how much you’ll receive once you reach full retirement age. You can also visit the SSA website and use its benefits calculator to determine your estimate.

Should You Wait To Claim Your Benefits?

The sooner you claim Social Security benefits, the less you’ll receive in monthly payments. For example, if you claim your benefits at 62, you’ll only receive 70 percent of your PIA. It’ll gradually increase — 86.7 % by the time you reach 65 if you were born in 1960 or later — until you reach full retirement age, where you’ll receive 100% of benefits. 

On the other hand, claiming your benefits early might be a good idea if you really need the income. Perhaps you’re forced to retire or your health limits what you can do. In this case, you can opt to receive benefits any time after age 62 and supplement your income with work. Just make sure you don't go over the annual earnings limit or your benefits will be reduced.

What Are Delayed Retirement Credits?

Delayed retirement credits are financial rewards the SSA offers you for waiting to claim your retirement benefits. You’ll start earning credits once you hit your FRA — your benefits will increase by two-thirds of a percent or 8% each year. Once you reach age 70, there will be no more increases. In other words, you’ll receive a total of a 24% increase in monthly benefits.

For those who have enough to retire on without claiming Social Security benefits, the extra bonus can be worth it. Holding off for an increase may not be a sound financial move for would-be retirees who struggle with their budget as-is or don’t have enough saved.

If you’ve already started receiving benefits and want to take advantage of delayed retirement credits, you can opt to temporarily go without them. During this time, you’ll be able to collect credits as if you haven’t been receiving benefits.

If you’re already drawing retirement benefits but want to up your future payments (and can afford to temporarily go without your current ones), you can direct Social Security to suspend your benefits. During the suspension period, you’ll collect the credits just as if you’d never filed. This option is available between FRA and age 70.

Gaining a full understanding of your Social Security retirement age is important so you’ll be able to get a clearer picture of your financial life. That way, you can compare what you could be getting during your golden years to your expenses during retirement. Having these numbers in front of you can give you insights into developing a more strategic approach for your retirement finances.

Sarah Li Cain

Sarah Li Cain is a freelance personal finance, credit and real estate writer who works with Fintech startups and Fortune 500 financial services companies to educate consumers through her writing. She’s also a candidate for the Accredited Financial Counselor designation and the host of Beyond The Dollar, where she and her guests have deep and honest conversations on how money affects our well-being.