History Of Social Security Full Retirement Age
Under the original Social Security Act of 1935, workers had to reach age 65 to receive a full retirement benefit. This full retirement age, though commonly attributed to a similar old age social insurance program designed by Otto von Bismarck in Germany in 1889, was actually simply rooted in the fact that many state pension systems used age 65, and the Committee on Economic Security decided to adopt what was already common practice.
The full retirement age remained at age 65 until 1983, when the Social Security Trust was about to run out of money , and the National Commission on Social Security Reform recommended a series of adjustments to the system to extend its financial stability for another 50 years. The end result was the Social Security Amendments Act of 1983, signed into law on April 20th of that year , which made a wide range of changes to the Social Security system including increasing the Social Security full retirement age from 65 to 67.
Given these birth years, the reality is that for more than a decade now since 2005 every prospective retiree, upon turning age 62 and becoming eligible for early retirement benefits, has had a full retirement age of 66 .
However, the 11-year hiatus of full retirement age adjustments has now come to an end, as anyone turning 62 in 2017 was born in 1955, which means their full retirement age is no longer age 66. Instead, it is becoming age 66 and 2 months!
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A Commonwealth Seniors Health Card can help you get cheaper health care. As an Age Pensioner, youll be eligible for a Commonwealth Seniors Health Card, provided that you:
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What Is My Ss Full Retirement Age
Early retirement
You can get Social Security retirement benefits as early as age 62. However, well reduce your benefit if you retire before your full retirement age. For example, if you turn age 62 in 2021, your benefit would be about 29.2 percent lower than it would be at your full retirement age of 66 and 10 months.
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How The Full Retirement Age Affects Social Security
Full retirement age also affects the Social Security program as a whole. Americans are living longer and the working-age population is shrinking. Some have proposed raising the FRA to 70, based on predictions that the Social Security reserve fund could run out of money by 2034.
Even if the reserve fund is depleted, however, future retirees should expect to get something from Social Security. Social Security income is taxable, which generates revenue. Plus, the Social Security program gets funding from the interest generated by trust funds. So future retirees will likely receive around 75% of every dollar that they currently contribute to the program.
Medicare Enrollment Can Be Impacted By Social Security Benefits
Depending on your situation, you with either need to enroll in Medicare at age 65 or you may be able to delay. If you continue to work past age 65 and have creditable employer coverage , you can likely delay enrolling in Medicare until you lose that employer coverage. In most cases, people turning 65 will need to get Medicare during their 7-month Initial Enrollment Period to avoid financial penalties for enrolling late. Your IEP begins 3 months before the month of your 65th birthday and ends 3 months after.
Social Security benefits fit in the Medicare enrollment journey in one special way. If you are receiving either Social Security benefits for retirement or for disability, or Railroad Retirement Board benefits, you will be automatically enrolled in Medicare Part A and Part B when you first become eligible.
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Are Social Security Benefits Taxable At Full Retirement Age
Your age does not have an impact on whether you will owe tax on Social Security benefits. Depending on your earnings, you may pay federal taxes on Social Security benefits regardless of the age at which you claim.
Social Security benefits are taxed on amounts exceeding the “provisional income” limit set by the IRS. To calculate your provisional income, add up all non-Social Security sources of income, including nontaxable income such as municipal bond interest, and include half of your annual Social Security income.
Single filers earning provisional income between $25,000 and $34,000 and married joint filers earning between $32,000 and $44,000 will owe income taxes on 50% of their Social Security benefits. For single filers with provisional income above $34,000 and married filers above $44,000, up to 85% of Social Security benefits will be taxable.
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.
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Consequences Of The Increase In Social Security Full Retirement Age
The significance of the increase in full retirement age from 66, to 66-and-2-months instead, is that now trying to take benefits at 66 is actually an early benefits election, resulting in a 1.1% reduction for starting payments 2 months before full retirement age.
For those who want to start as early as possible at age 62 doing so is no longer a decision to take benefits 4 years early. Instead, its 4 years and 2 months early, which means the age-62 benefits reduction is now 25.83% . Similarly, delaying to the maximum age 70 would not earn 4 years worth of Delayed Retirement Credits, but instead only 3 years and 10 months of DRCs, for a total increase of 30.67% .
The end result: benefits can never quite be as high as they were before at the maximum, and at any given age, Social Security benefits take a slight haircut.
Notably, the impact of a rising full retirement age will continue from here for several more years as well. As noted earlier, the full retirement age is scheduled to go all the way to age 67 over the next 5 years, such that those born in 1960 or later who start turning 62 in 2022 will find when making their Social Security decisions that an age-62 starting date is a full 30% reduction, while delaying to age 70 is only a 24% increase.
Financial Planning Implications Of The New Full Retirement Age
Ultimately, the reality is that for most retirees, theres nothing to be done about the changes in the full retirement age. Theyre a function of a law that was passed over three ago, which simply took until now to finish their slowly-phased implementation, based on the retirees birth year. And obviously, theres no way to change your birth year for better or worse, you get what you get from here.
In addition, its important to recognize that while the increase in full retirement age makes the adverse consequences of starting at age 62 a little more severe and the upside of waiting until age 70 less advantageous , it doesnt materially change the relative value of waiting, and the breakeven period.
For instance, an individual with a $1,000/month retirement benefit at full retirement age of 66 could have enjoyed $750/month at age 62 or $1,320/month at age 70 . In the future, if that individuals full retirement age goes to 67, it will be $700/month at age 62 , and $1,240/month at age 70 . However, in both cases, its still an increase of about 76% to wait from age 62 to age 70, and the breakeven period is still about the same 20 year time period. Again, the primary impact of the changing full retirement age is not actually to alter the value of waiting, just to reduce overall benefits.
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How Medicare Affects Early Retirement
As mentioned above, Medicare benefits start when you turn 65. To be exact, benefits kick in on the first day of the month in which you turn 65. Retiring earlier than that is considered early retirement, and you will need to make other plans to secure adequate health insurance coverage until your Medicare coverage begins. As a retiree, you likely won’t have health care coverage options through an employer, but you can access plans through the health exchange marketplace.
Other Adjustments From The Increase In Fra Spousal And Survivor Benefits
In addition to changes the consequences of taking early or late retirement benefits, the change in full retirement age also impacts spousal and survivor benefits as well.
In the case of spousal benefits, the standard rules stipulate that spousal benefits will be reduced by 8.33%/year for the first 3 years, and 5%/year for each additional year. Thus, it was originally the case that taking spousal benefits at age 62 was just a 25% reduction when the full retirement age was 65, but starting at age 62 has been a 30% reduction for the past decade , and beginning in 2017 the age-62 spousal reduction will be 30.83%, climbing to a maximum reduction of 35% in 2022 for those born in 1960 or later.
When it comes to survivor benefits, though, the rules are slightly different. Survivor benefits can be claimed as early as age 60, and the maximum reduction for starting survivor benefits that early is always a flat 28.5% reduction, applied pro-rata from the maximum retirement age back to age 60. Thus, for instance, in the original system when the full retirement age was 65, starting at age 60 was five years early, and the reduction was 28.5% / 5 years = 5.7%/year . At full retirement age of 66, starting at age 60 is six years early, so the reduction is 28.5% / 6 years = 4.75%/year . And when full retirement age ultimately goes to 67, the reduction will be 28.5% / 7 years = 4.07%/year .
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Before You Make Your Decision
There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:
- If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
- That there are other things to consider when making the decision about when to begin receiving your retirement benefits.
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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How Can We Help You Retire Free Retirement Review
To get started on your journey to retirement, you can take our free no-obligation first meeting.
Youll be able to speak with our financial advisers who can explain our PlanHappy Lifestyle Financial Planning process, how it can help you, but most importantly, you can work through what it really is you want to do in retirement.
You tell us what you want to do, you tell us your goals and aspirations, and then we start your journey to retirement.
Retirement Savings how much you need to save for retirement Retirement Date when you can afford to stop working Retirement Income how much you can spend in retirement
So, if youre looking to make sense of pension and retirement planning options with straightforward financial planning advice, were here to help.
Contact our friendly team on, 033 0133 3035 or use the form below to arrange a call back from one of our experts.
Joslin Rhodes Pension & Retirement Planning Real Advice, For Real People
Does The Spouse Get Everything After Death
When one spouse dies, the surviving spouse automatically receives complete ownership of the property. This distribution cannot be changed by Will. Because the surviving spouse becomes the outright owner of the property, he or she will need a Will to direct its disposition at his or her subsequent death.
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Tips For Planning For Retirement
- Dont forget to factor Social Security benefits into your savings total. Use SmartAssets Social Security calculator to determine how much youll receive.
- A financial advisor can be a big help in figuring out how Social Security fits with other income sources in your retirement plan. Finding the right financial advisor that fits your needs doesnt have to be hard. SmartAssets free financial advisor matching tool matches you with financial advisors in your area in 5 minutes. If youre ready to be matched with local advisors that will help you achieve your financial goals, get started now.
Benefits Planner: Retirement Retirement Age Calculator Ss
Once upon a time, turning 65 years old meant you could get your full Social Security retirement benefits and Medicare coverage at the same time.But over the last couple of years, the Social Security Administration changed the full retirement age twice – first to age 66 for people born from 1948 to 1954, then again to age 67 for people born in 1955 or later 1973 age to find out how old is someone born in 1973 in years, months, weeks, days, hours, minutes and seconds. January 1, 1973 – 48 years and 6 months. January 2, 1973 – 48 years 5 months, 4 weeks, and 1 day. January 3, 1973 – 48 years 5 months, and 4 weeks. January 4, 1973 – 48 years 5 months, 3 weeks. However, when parents become naturalized citizens, their kids with green cards will also acquire U.S. citizenship. U.S. Citizenship by Being Born in the United States. In most situations, any child that is born in the United States or one of its territories will automatically receive American citizenship
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How Federal Retirement Eligibility Is Calculated
Like many retirement systems, FERS uses the “Rule of 80.” This states that an employee must reach a combined 80 years when adding age and federal service to be eligible for retirement.
Let’s say an employee begins federal service right after college at age 22. After 29 years of service, they reach age 51. The employee has satisfied the rule of 80, but hasn’t yet reached the minimum retirement age. At an MRA of 57, the employee has six more years left until retirement eligibility.
Assuming this employee wants to retire as soon as they’re eligible to do so, FERS gains six more years of retirement contributions from them and forgoes six years of annuity payments by forcing them to wait until age 57.
Retirement can be tempting at age 51. An employee can decide to do something different and still have enough time left to make a real career out of it. Retirement is still tempting at age 57, but many employees choose to ride out federal service until retiring sometime in their early 60s.
The Social Security Administration allows citizens to take early retirement at age 62, so this is a popular retirement age among public servants at all levels of government as well.
Early Retirement Comes With Challenges
There’s a reason most people continue to work until traditional retirement ages, and it isn’t because they love their jobs. Retiring early comes with serious financial challenges.
The primary challenge is ensuring that you have enough assets to provide an acceptable level of income throughout your remaining years. The average lifespan in the U.S. is just under 79 years. For someone who retires at 55, that means they need to save up at least 24 years’ worth of income. Healthier individuals who plan on living beyond the age of 79 will need to save up even more.
On the other hand, if you work until you reach age 70, your savings will only need to provide for a much shorter time frame.
You can use various retirement income calculators, including several Social Security benefits calculators, to help you create a projection. You can also use the services of a qualified financial advisorideally someone who specializes in retirement income planning.
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