About Your
Retirement Benefits
How Do You
Qualify For Retirement Benefits?
When you work and
pay Social Security taxes (called FICA on some pay stubs), you earn
Social Security credits. Most people earn the maximum of four credits
per year.
The number of
credits you need to get retirement benefits depends on your date of
birth. If you were born in 1929 or later, you need 40 credits (10 years
of work). People born before 1929 need fewer than 40 credits (39 credits
if born in 1928; 38 credits if born in 1927; etc.).
If you stop
working before you have enough credits to qualify for benefits, your
credits will remain on your Social Security record. If you return to
work later on, you can add more credits so that you qualify. No
retirement benefits can be paid until you have the required number of
credits.
If you’re like
most people, you will earn many more credits than you need to qualify
for Social Security. These extra credits do not increase your Social
Security benefit. However, the income you earn while working will
increase your benefit, as you will learn in the next section.
How Much Will
Your Retirement Benefit Be?
Your benefit
amount is based on your earnings averaged over most of your working
career. Higher lifetime earnings result in higher benefits. If you have
some years of no earnings or low earnings, your benefit amount may be
lower than if you had worked steadily.
Your benefit
amount also is affected by your age at the time you start receiving
benefits. If you start your retirement benefits at age 62 (the earliest
possible retirement age) your benefit will be lower than if you waited
until a later age. (See Early Retirement and Delayed Retirement.)
Here’ s An
Important Point: Each year, about three months before your
birthday, you receive a Social Security Statement that provides
you a record of your earnings, estimates of your Social Security
benefits for early retirement, full retirement and retirement at age
70. It also provides an estimate of the disability benefits you could
receive if you become severely disabled before you’re eligible for
full retirement, as well as estimates of the amount of benefits paid
to your spouse and other eligible family members due to your
retirement, disability or death. The Social Security
Statement can be a valuable tool in helping you plan for a secure
financial future in your retirement.
Full
Retirement Age
The usual
retirement age for people retiring now is age 65. Social Security calls
this "full retirement age," and the benefit amount that is payable is
considered the full retirement benefit.
Because of longer
life expectancies, the Social Security law was changed in 1983 to
increase the full retirement age in gradual steps until it reaches age
67. This change starts in the year 2003, and if affects people born in
1938 and later.
Look at the table
"Age To Receive Full Social Security Benefits" to find your full
retirement age.
Early
Retirement
You can start your
Social Security benefits as early as age 62, but the benefit amount you
receive will be less than your full retirement benefit.
If you take early
retirement, your benefits will be permanently reduced based on the
number of months you will receive checks before you reach full
retirement age. If your full retirement age is 65, the reduction for
starting your Social Security at age 62 is about 20 percent; at age 63,
it is about 13-1/3 percent; and at age 64, it is about 6-2/3 percent.
Age To Receive Full Social Security Benefits
|
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
|
|
1943–1954
|
66 |
|
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 and later
|
67 |
If your full
retirement age is older than 65 (that is, you were born after 1937), you
still will be able to take your retirement benefits at age 62, but the
reduction in your benefit amount will be greater than it is for people
retiring now.
Here’s how it
works. If your full retirement age is 67, the reduction for starting
your benefits at 62 is about 30 percent; at age 63, it’s about 25
percent; at age 64, about 20 percent; at age 65, about 13-1/3 percent;
and at age 66, about 6-2/3 percent.
As a general rule,
early retirement will give you about the same total Social Security
benefits over your lifetime, but in smaller amounts to take into account
the longer period you will receive them.
Some people stop
working before they reach age 62. In that case, it’s important to
remember that during years with no earnings, you miss the opportunity to
increase your benefit amount by replacing lower earnings years with
higher earnings years.
Here’ s An
Important Point: Sometimes poor health forces people to retire
early. If you are unable to continue working because of poor health,
you should consider applying for Social Security disability benefits.
The amount of the disability benefit is the same as a full, unreduced
retirement benefit. If you are receiving Social Security disability
benefits when you reach full retirement age, those benefits will be
converted to retirement benefits. For more information, call us to ask
for a copy of the booklet, Disability Benefits (Publication No.
05-10029).
Delayed
Retirement
Not everyone
retires at full retirement age. You may decide to continue working full
time beyond that time. In that case, you can increase your Social
Security benefit in two ways.
- Each additional
year you work adds another year of earnings to your Social Security
record. Higher lifetime earnings may result in higher benefits when
you retire.
- In addition,
your benefit will be increased by a certain percentage if you choose
to delay receiving retirement benefits. These increases will be added
in automatically from the time you reach your full retirement age
until you start taking your benefits, or you reach age 70. The
percentage varies depending on your year of birth. See the chart below
for the increase that will apply to you.
For example, if
you were born in 1943 or later, we will add 8 percent per year (2/3 of 1
percent per month) to your benefit for each year you delay signing up
for Social Security beyond your full retirement age.
Increases For Delayed Retirement
|
Year of Birth
|
Yearly Rate of
Increase |
|
1917—1924
|
3.0% |
|
1925—1926
|
3.5% |
|
1927—1928
|
4.0% |
|
1929—1930
|
4.5% |
|
1931—1932
|
5.0% |
|
1933—1934
|
5.5% |
|
1935—1936
|
6.0% |
|
1937—1938
|
6.5% |
|
1939—1940
|
7.0% |
|
1941—1942
|
7.5% |
|
1943 or later
|
8.0% |
Here’ s An
Important Point: If you decide to delay your retirement, be
sure to sign up for Medicare at age 65. In some circumstances,
medical insurance costs more if you delay applying for it.
Choosing Your
Retirement Date
If you plan to
start your retirement benefits after age 62, it is a good idea to
contact Social Security in advance to see which month is best to claim
benefits. In some cases, your choice of a retirement month could mean
additional benefits for you and your family.
It may be to your
advantage to have your Social Security benefits start in January, even
if you don’t plan to retire until later in the year. Depending on your
earnings and your benefit amount, it may be possible for you to start
collecting benefits even though you continue to work. Under current
rules, many people can receive the most benefits possible with an
application that is effective in January.
If you are not
working, or your annual earnings are under the earnings limits explained
on Page 12, or you plan to start collecting your Social Security when
you turn 62, you should apply for benefits three months before the date
you want your benefits to start.
Because the rules
are complicated, we urge you to discuss your plans with a Social
Security claims representative in the year before the year you
plan to retire.
Retirement
Benefits For Widow(er)s
Widow(er)s can
begin receiving benefits at age 60 or age 50 if disabled. If you are
receiving widows or widowers (including divorced widows or widowers)
benefits, you can switch to your own retirement benefits —assuming
you’re eligible and your retirement rate is higher than your widow(er)’s
rate—as early as age 62. In many cases, a widow(er) can begin receiving
one benefit at a reduced rate and then switch to the other benefit at an
unreduced rate at full retirement age. The rules vary depending on the
situation, so you should talk to a Social Security representative about
the options available to you.
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