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Your Social Security retirement age, also referred to as your full or normal retirement age, depends on the year you were born and can be anywhere from 66 to 67 years of age. This is the age at which you can claim your full Social Security retirement benefit, and claiming before or after will result in a modified benefit amount. Here's what you need to know about your Social Security retirement age, what it means to you, and what could happen in the future.
Social Security retirement age
To help improve Social Security's finances, Congress decided that the retirement age should be raised to 67. This is phased in gradually, starting with retirees who were born in 1955.
For retirees born in 1954 or earlier, full or normal retirement age is 66 years of age. After that, two months are added to the full retirement age for every year until 1960, when the full retirement age reaches 67. With that in mind, here's a chart that can help you determine your full retirement age:
Data source: Social Security Administration.
What it means to you
Full retirement age is important because it is the age to which you must wait in order to get your full Social Security retirement benefit.
Your full benefit is calculated as your 35 highest earning inflation-adjusted years, applied to a formula. As of 2016, the formula is:
- 90% of your average monthly earnings, up to $856
- 32% of the amount greater than $856, up to $5,157
- 15% of the amount above $5,157
If you choose to claims before your full retirement age, your benefit will be reduced. Up to 36 months early, your benefit will be reduced by 6-2/3% each year, or 5/9 of a percent per month. Beyond 36 months, your benefit will be further reduced by 5% per year, or 5/12 of a percent per month, as early as 62 years of age. Conversely, if you choose to wait past your full retirement age, your benefit will be permanently increased by 8% for every year you wait, up to a maximum of 70 years of age.
For reference, here's how early or late retirement would affect somebody born in 1960, whose full retirement age is 67, and whose full retirement benefit is $1500 per month.
Data source: Author's calculations, based on SSA information.
What could happen to the retirement age in the future?
It's no big secret that Social Security isn't exactly in the best financial shape. The latest projections call for Social Security to run out of reserves by 2034, and if we don't want this to happen, a change will have to be made. There are only two main types of changes that can be made: raising taxes or cutting benefits.
Raising the retirement age would fall under the category of benefit cuts, but it seems rather unlikely to happen, even with the incoming Republican government. Benefit cuts are widely unpopular among all income levels, age groups, and political affiliations, so they are unlikely to gain serious political traction. What's more, raising the retirement age wouldn't do a lot to solve the problem. An analysis found that even a big increase to a full retirement age of 70 would only take care of 25% of the Social Security funding gap, while a 1% tax increase would make up for 52% of the problem and eliminating the taxable wage cap would pay for 74%.
In a nutshell, while an increase in the full retirement age is certainly possible, it's not the most likely outcome of the ongoing debate on to fix Social Security.
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