What Happens If You Claim Social Security Before Full Retirement Age
If you opt to begin receiving your benefits early, your benefits will be a small percent less, based on the number of months you have retired before full retirement age. A reduction also applies if you choose to claim your spousal benefits early.
For example, according to the SSAs retirement age chart, if you were born in 1959, your full retirement age is 66 and 10 months. If you choose to retire at 62, your $1,000 retirement benefit would decrease to $708 a reduction of nearly 30%.
How Does Full Retirement Age Affect Your Social Security Benefits
If you claim your benefits at full retirement age, you will receive your standard Social Security benefit amount. If you claim prior to FRA, you will be subject to early filing penalties that reduce your benefit by the following amounts:
- 5/9 of 1% for each of the first 36 months before FRA
- 5/12 of 1% for each subsequent month before FRA
This amounts to a 6.7% annual reduction for each of the first three years and an additional 5% reduction for each following year before FRA. If you claim benefits at 62 with an FRA of 67, you will face a full 30% reduction in benefits.
By contrast, if you claim benefits after FRA, you receive delayed retirement credits valued at 2/3 of 1% per month. This results in an 8% annual increase to your monthly benefit. Delayed retirement credits can be earned until age 70, after which time there is no financial benefit to delaying your claim. Delayed retirement credits cannot be earned if you are claiming either spousal or survivor benefits.
What Happens If You Claim Social Security After Full Retirement Age
If you claim your Social Security benefits after you reach full retirement age, you can receive full Social Security benefits plus any delayed credit you earn after full retirement age . Many rely on Social Security for their retirement savings plan, which means you may want to delay retirement until you reach this age.
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Working While On The Cpp Retirement Pension
You can still work if you are receiving a CPP retirement pension, without reducing the pension amount. In fact, you could increase it by means of the CPP post-retirement benefit.
If you work while receiving your CPP retirement pension and are under age 70, you can still make CPP contributions. Each year you contribute to the CPP will result in a post-retirement benefit and increase your retirement income. We will automatically pay you this benefit the following year. Youll receive it for the rest of your life.
You can choose to stop your post-retirement contributions when you reach age 65. Your CPP contributions will stop when you reach 70 years of age, even if youre still working.
Changes Made To The State Pension Age And Will It Change Again
The retirement age in the UK has undergone progressive changes since April 2010. The retirement age and the amount received are regularly reviewed, at least once every five years, to ensure that the pension amount is fair and the retirement age is in accordance with life expectancy.
When the 1995 Pensions Act was passed, the pension age for women was fixed at 60. Under the 2011 Pensions Act, this was increased to 65, which then became 66 for both men and women. A further amendment raised it to 67 for people retiring between 2026 and 2028, and 68 for those retiring between 2044 and 2046, irrespective of their gender.
Life expectancy has increased over time, from 78.5 in 1948 to about 87.8 in 2017. This is why it is necessary to make amendments to the pension age to keep a check on the number of people above the State Pension age in the UK. The pension age for men and women may change again following life expectancy and other economic factors.
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What Is The Average Retirement Age
The average retirement age is 64 for men and 62 for women, but before you start counting the number of years you have left in the workforce, you may want to know some crucial factors.
About half of workers intend to continue working past age 65, and many retirees return to work. Some cut their workload to part-time, and others choose to change careers. Some retirees even return to working full-time and retire again later. In other words, the average retirement age isnt very clear-cut.
Additionally, if you base your decision on the average retirement age of 61, you wont be able to collect your Social Security benefit and you wont be eligible for Medicare.
How To Calculate And Claim The State Pension
It is important to know how youll receive from your pension so that you can plan your retirement. The State Pension amount can either be checked online or can be calculated using various State Pension calculators to get an estimate of how much you would get.
The government website not only gives a State Pension amount forecast but also provides information on when you will get your State Pension and how you can increase it. The service cant be used if you have already started receiving your State Pension or if you have deferred claiming it.
The State Pension does not get processed automatically. It needs to be claimed at least two months before you reach your pension age in the UK. The process of claiming the State Pension can either be completed online, on the phone or by downloading the State Pension claim form and sending it to your local pension centre.
If you plan to continue working beyond your State Pension age, you can still claim your pension as soon as you reach the pension age in the UK. You also have the option to defer claiming your pension. Any delay in taking your State Pension can increase the amount you receive when you claim it in the future.
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Use Which’s State Pension Age Calculator To Find Out When You’ll Qualify For The State Pension
Successive governments have increased the age at which we can get our hands on the state pension.
The days when women could get it at 60 and men at 65 will soon be a distant memory.
For many of us, the state pension will form the core of our retirement income, so its important to be clear exactly when you qualify for it. Use our calculator to find out when you can start claiming the state pension.
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Basing The Calculation On Income
Many financial experts recommend a replacement percentage of 70 to 85%. For example, if you make $50,000 per year, your retirement goal could be to live on between $35,000 and $42,500 per year.
Unfortunately, if you are in an early stage of your career or life, this rule of thumb might not be especially beneficial. Your income now may not reflect how much you will earn later in life or what you can expect to spend at a later life stage. Projecting the amount you will want to have for your senior years can be challenging if you are unsure what your pre-retirement income will be.
This rule of thumb also assumes you spend most of what you earn. If you are a saver by nature and spend a much smaller percentage of what you earn every year, it might not make sense for you to use this method to calculate your retirement savings. If you spend more than what you make and rack up credit card debt, perhaps this approach wont work for you either.
When Should You Start Collecting Social Security Benefits
To determine when you should start taking your benefits, its important to understand how much your check is affected by when you claim your benefit. As mentioned before, you can claim your benefit as early as age 62, but reaching full retirement age can secure your full benefit.
So when exactly is full retirement age? That depends on when you were born.
| Year of birth | |
|---|---|
| 65 + 2 months for each year past 1937 | |
| 1943-1954 | |
| 66 + 2 months for each year past 1954 | |
| 1960 and later | 67 |
While the full retirement age used to be 65, changes to the program have increased that age. For example, those born in 1955 now have to wait an extra two months beyond age 66 to claim their full benefit. Someone born in 1959, for example, would have to wait until age 66 and 10 months to get the full benefit. Anyone born in 1960 or later, receives their full benefit at 67.
But some retirees choose to wait even longer. You may wait until as late as age 70 to claim your benefit, but then you must take it. Youll receive a bigger check for doing so.
So what is the upside to delaying your Social Security benefit after age 62? Your check wont get hit by a serious benefit reduction. Heres how much a $1,000 monthly check will become if you claim your benefit as soon as youre eligible at age 62.
| Year of birth | If you file at 62, benefit reduced by: | A $1,000 check becomes |
|---|---|---|
| $700 |
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Should You Take Social Security At Full Retirement Age
There are tons of factors to consider in deciding when to start your Social Security benefits.
For people with serious health problems, it might make sense to start benefits early. Someone who was disabled before full retirement age and can no longer work might consider forgoing a higher monthly benefit to start collecting monthly Social Security benefits immediately. Meanwhile, maximizing Social Security benefits is a strategy thats most relevant for people who expect to live longer than average.
Consider a hypothetical beneficiary who lives to 79, which is the average American life expectancy:
If they started collecting Social Security at age 62, with a $1,400 monthly payment, they would receive a lifetime total of $285,600 in benefits.
If they waited until their full retirement age, theyd receive a $2,000 monthly benefit, for a lifetime total of $300,000.
If they waited as long as possible to claim benefitsto age 70they would get a monthly benefit of $2,600, or a lifetime total of $280,000.
For this hypothetical American, no matter when they choose to start receiving Social Security benefits, the differences in lifetime total benefits isnt very large. Deciding when to start Social Security isnt always as simple as aiming to maximize your monthly payment.
What Is My Full Retirement Age
Full retirement age for future beneficiaries will fall between the ages of 66 and 67. This is the age at which you can expect a full, unreduced benefit from Social Security. If you delay filing for benefits until after your full retirement age, you can expect a benefits increase of up to 8% per year until you reach age 70.
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What To Consider Before Filing For Social Security
A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.
But heres the key trade-off: you can file early and take a reduced benefit, expecting that a shorter life span will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.
Social Security is like longevity insurance, says Brent Neiser, a Certified Financial Planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.
Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.
You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.
What Is Full Retirement Age
Full retirement age is the age at which you have access to your full Social Security benefits. Your lifes earnings determine this amount. If you were born between 1943 and 1954, for example, your FRA is 66. The full retirement age in the U.S. for those born in or after 1960 is 67.
Full retirement age also applies to your spousal benefits, which you can collect from your husbands or wifes work record. For survivors born between 1945 and 1956, the full retirement age is 66. For survivors born in or after 1962, the full retirement age is 67.
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Will Full Retirement Age Change Again
Though the last legislative change to full retirement age was in 1983, Carroll warns that a future increase in full retirement age is a likely component of a comprehensive Social Security reform package. The culprit for this likely change is our increasing longevity.
More people are living long enough to claim Social Security than in the past, and theyre then spending more years receiving benefits. This makes the program significantly more expensive today than when it was founded, Carroll says. To keep Social Security solvent and provide the same level of benefits, the bar to receive Social Security either needs to rise, taxes have to increase or both.
How Does Working After Full Retirement Age Affect My Benefits
Continuing to work past your full retirement age, whether or not you take benefits, can potentially increase your future benefits. Thats because the Social Security administration calculates your primary insurance amount based upon your 35 highest-earning years and uses zeros for the calculation if you have worked fewer than 35 years.
Working longer replaces each of those zeroes, or even lower earning years if you have no zeros, which boosts your PIA. Its also important to note that lower-earning years after retirement will not affect your benefits since Social Security uses whichever 35 years are your highest earning.
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Can I Work After Full Retirement Age
Beneficiaries are free to continue working while taking their Social Security benefits, no matter what age they start taking those benefits. However, working and taking Social Security benefits before reaching full retirement age may affect your benefits.
If you start taking Social Security early but keep working, youre subject to whats called an earnings test. For every $2 you earn over $18,960, you will see $1 withheld in Social Security benefits. And in the year you reach full retirement age, this limit changes to $1 in benefits for every $3 you earn above $50,520 up to the month of your birthday.
Once you reach full retirement age, though, you can keep every dollar of your Social Security benefits, no matter how much income you bring in. Your future benefits will also be adjusted to include the money that the earnings test previously factored out.
Early Benefits Can Still Pay Off
However, taking early benefits can still pay off despite the reduced monthly check. But youll want to be sure you budget for a reduced benefit.
No one can predict how long youll live, but if youre facing a potentially significant reduction in life expectancy and are short of income, taking Social Security early may be appropriate, Neiser says.
Married women are also good candidates for claiming early benefits because they are likely to outlive their husbands. Those widows then become eligible to receive the greater of either their benefit or their late husbands benefit.
However, this scenario works only if the husband does not claim his benefits early. By not claiming early benefits, the husband effectively increases the monthly benefit his wife eventually receives. So youll want to calculate how filing early will affect your spousal benefit here.
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Retirement Age Of The National Pension
If you take out your national old-age pension early, it will be permanently reduced by 0.4% for each month from when you start drawing the pension to the month after you turn 65. If you wait to take out your national old-age pension at age 65, it will not be reduced.
In the future, when the retirement age of the old-age pension of the earnings-related pension system is linked to life expectancy as of those born in 1965, the retirement age of the national old-age pension will correspond to that of the earnings-related old-age pension.
Full Retirement Age For Survivors Benefits
Your full retirement age may be different if youre a widow or widower collecting survivors benefits. In fact, it may be earlier than the normal retirement age for your own Social Security benefits.
If you were born in 1956, for example, your FRA is 66 and four months. But survivors may begin receiving benefits four months earlier, at age 66.
The earliest you can begin claiming survivors benefits is 60. But much like standard Social Security benefits, youll receive a reduced monthly benefit amount if you want access to your survivors benefits before you reach your full retirement age.
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