Money Pilot Financial Advisor Podcast
Money Pilot Financial Advisor Podcast
Episode 66 Normal Retirement Age
Today we’re talking about the Social Security Normal Retirement Age, also called the Full Retirement Age, which is between ages 65 and 67 depending on the year you were born. When you begin drawing Social Security retirement benefits, the amount you will received each month will depend on whether you start before your normal retirement age, at that age, or after. If you were born before 1937 your Normal Retirement Age is 65. If you were born in 1960 or later, your Normal Retirement Age is age 67. Everybody else, yours is in-between age 65 and 67. Check out your exact Normal Retirement Age in years and months on the Social Security website https://www.ssa.gov/oact/progdata/nra.html.
I highly recommend you go to the Social Security website if you haven’t already, and establish an account. https://www.ssa.gov/site/signin/en/ You’ve been earning Social Security credits based on your earnings record. Your employers have been withholding Social Security and Medical taxes from your pay and reporting to Social Security what they paid you each year. You want to be sure these earnings records are accurate. Your retirement benefit will be based on your highest 35 years of income, so every year is important. Log into ssa.gov once a year and compare what earnings they recorded for last year with your tax documents to and make sure it’s accurate, or correct any mistakes. The website will also give you estimates of future payments. Find out how much you would qualify for if you become disabled, what your family members would receive if you die, and what your Social Security retirement benefits would be.
Your Normal Retirement Age. is the age you can start receiving your full Social Security retirement benefit. The formula used to compute it is very complicated, but its’s easy to see the amount when you log into your account. Everyone eligible can apply and begin receiving benefits anytime from age 62 to age 70. But if you start early you receive less each month. Start later and you receive more. As an example, if you were born in 1990. Your Normal or Full Retirement Age is 67. You want to begin receiving Social Security retirement benefits at age 62. That’s 5 years early, so your monthly benefit would be reduced by 30%. If you full retirement benefit is $2,000 a month, you would receive only $1,400 a month if you start at age 62. You could choose any age between 62 and 67. But the earlier you begin benefits, the lower the payments.
For each year you delay benefits after your full retirement age up to age 70, your benefit will increase by 8% year. That’s huge. In our example. For someone with a full retirement benefit of $2,000 a month, if you delay receiving benefits until you’re age 70, your payment will be $2,480 a month. Looking at the yearly amounts, you could retire with $16,800 a year at 62, $24,000 a year at 67, or $29,760 starting at age 70.
How do you decide when to start drawing benefits? It depends on your situation. Will you have enough resources to live on while you delay? Delaying is a low risk way of getting a higher benefit. How long will you live? Just from a numbers perspective, the longer you live the better off you are delaying benefits. One of the biggest concerns when planning for retirements is making sure you don’t run out of money before you run out of life. Delaying drawing Social Security can help prevent that. If your health is poor and and you think you will die younger than average, it may be better for you to start benefits earlier. Taxes can also impact your decision. Your Social Security benefits are taxed when you other taxable income crosses certain thresholds.
Welcome to the Money Pilot Financial Advisor Podcast, where you team up with Money Pilot founder, former Army helicopter pilot and your host Katie Cannon, you put your money where your heart is. Together, we'll tackle issues big and small so you can take charge and lead your financial life. Hello, and welcome to Episode 66. Today, we're going to talk about the normal retirement age, which is somewhere around 66. This is kind of a confusing topic. Many of our military will say it's normal to retire in your 40s, at least from the military. Our financial independence retire early or FIRE listeners maybe shooting to retire at 50. But today, we're talking about the Social Security normal retirement age, also called the full retirement age, which is between ages 65 and 67. Depending on the year you were born. And ironically, it really isn't tied to when you actually retire at all. So why do we care what social security says is a normal retirement age. When you decide to begin drawing Social Security retirement benefits, the amount you will receive each month will depend on whether you start before your normal retirement age, at that age, or after. First up, exactly what age are we talking about? If you were born before 1937, your normal retirement age is 65. If you were born in 1960, or later, which is probably most of my listeners out there, your normal retirement age is age 67. Everybody else yours is in between age 65 and 67. And if that's you check out your exact normal retirement age in years and months on the social security website. It's ssa.gov. But I'll put a link specifically to the normal retirement age page in the show notes. Okay, you know your Social Security normal retirement age. Now what? First, I highly recommend you go to the Social Security website if you haven't already, and establish an account. That link is in the show notes to why one of the best reasons is to do it yourself now before someone else tries to steal your identity and log into your account. Also, you've been earning Social Security credits based on your earnings record. Yeah, ever since your first on the books job as a kid. Your employers have been withholding sources security and Medicare taxes from your pay and reporting to Social Security, what they paid you each year, you want to be sure these earnings records are accurate. your retirement benefit will be based on your highest 35 years of income. So every year count. There's rarely an error, but if there is, let's face it, do you still remember exactly how much you earned at that McDonald's job. So login to ssa.gov once a year, and compare what earnings they recorded for last year with your tax documents just to make sure it's all accurate or correct any mistakes. One of the best features of ssa.gov is it will give you estimates of future payments. You can find out how much you would qualify if you were to become disabled. What would your family members receive if you die, and what your Social Security retirement benefits would be? Speaking of benefits, let's get back to your normal retirement age. That's the age you can start receiving your full Social Security retirement benefit. The formula they use to compute it is very complicated, but it's easy to see the amount when you log into your account. So again, if you were born in 1960 or later you You can begin receiving your full monthly benefit at age 67. But wait, there's more. Everyone eligible to receive a retirement benefit can apply and begin receiving benefits anytime from age 62 to age 70. Then who cares what my normal retirement ages, I'm cashing in at 62. Ah, but if you start early, you receive less each month. Start later, you receive more. Let's take a look. As an example, let's say you were born in 1990. Your normal or full retirement age is 67. You want to begin receiving Social Security retirement benefits at age 62. So age 67 minus 62. That's five years early. So your monthly benefit would be reduced by 30. That's three zero percent. If your full retirement benefit is supposed to be $2,000 a month, you would receive only$1,400 a month. If you start at age 62. The benefit is calculated by the number of months early. In our example, you could have chosen five years early, three years and two months early, six months early, you get the picture. But the earlier you begin benefits, the lower the payments. What about starting benefits later? For each year, you delay benefits after your full retirement age up to age 70. Your benefit will increase by 8% a year. That's huge. back to our example, again, for someone born in 1990, with a full retirement benefit of $2,000 a month. If you delay receiving benefits until you're age 70. Your payment will be $2,480 a month. Looking at the yearly amounts from our example. You could retire with $16,800 a year at 62 or $24,000 a year starting at 67 or $29,760, starting at age 70. That's a significant difference. If you're wondering, your benefit maxes out by delaying to age 70. So there's no benefit to waiting past that. How do you decide when to start drawing benefits? Well, it depends on your situation. Will you have enough resources to live on while you delay? delaying is a low risk way of getting a higher benefit. How long will you live? When just from the numbers perspective, the longer you live, the better off you are delaying benefits. So if your health is very poor, and you think you'll die younger than average, it may be better for you to start benefits earlier. Taxes can also impact your decision because your Social Security benefits are taxed when your other taxable income you receive crosses certain thresholds. So to wrap it up, if you're a long way off from your Social Security normal retirement age, remember, open an account on ssa.gov and check your earnings history every year for accuracy. And for long term retirement planning, consider not including Social Security until age 70. This will provide higher benefits later in life. One of the biggest concerns when planning for retirement is making sure you don't run out of money before you run out of life. And delaying drawing your Social Security can h lp prevent that. Is age 62 a lit le closer on your horizon? Expl re your options to retire your w y. Perhaps you ease into retirem nt by shifting to part time nd delay drawing Social Secur ty benefits until you finally s op working. Need the money to l ve on now or just don't beli ve you're going to live a l ng life? You may be best ff starting early. You can a so explore the impact of differ nt options on your taxes by work ng with a financial planner or y ur accountant. So I hope this sheds a little bit of light on what the Social Security considers a normal retirement age and how that's going to impact your benefits when you've decide to start drawing. And we'll talk to you again next week.
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