Retirement Benefits
By working and paying Social Security taxes, individuals earn “credits” toward Social Security benefits. Benefit payments are based on how much was earned over a full working career. Higher lifetime earnings result in higher benefits. Benefit payments are also affected by the age at which you retire. The “full retirement age” is 65 for people who were born before 1938. But because of longer life expectancies, the Social Security law was changed to gradually increase the full retirement age until it reaches age 67. This change affects people born in 1938 and later.
How do you qualify for retirement benefits?
When you work and pay Social Security taxes, you earn “credits” toward Social Security benefits. The number of credits you need to get retirement benefits depends on when you were born. If you were born in 1929 or later, you need 40 credits (10 years of work). If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record. If you return to work later on, you can add more credits so that you qualify. Social Security will not pay any retirement benefits until you have the required number of credits.
How much will your retirement benefit be?
Your benefit payment is based on how much you earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years when you did not work or had low earnings, your benefit amount may be lower than if you had worked steadily. Your benefit payment also is affected by the age at which you decide to retire. If you retire at age 62 (the earliest possible retirement age for Social Security), your benefit will be lower than if you wait until later to retire.
Deciding when to retire
You can get Social Security retirement benefits as early as age 62. However, you will receive a reduced benefit if you retire before your full retirement age. For example, if you retire at age 62, your benefit would be about 25 percent lower than what it would be if you waited until you reach full retirement age. Some people stop working before age 62. But if they do, the years with no earnings will probably mean a lower Social Security benefit when they retire.
Choosing when to retire is an important but personal decision. Regardless of the age you choose to retire, it is a good idea to contact Social Security in advance to learn the available options and make an informed decision. In some
cases, your choice of a retirement month could mean higher benefit payments for you and your family.
In deciding when to retire, it is important to remember that financial experts say you will need 70-80 percent of your preretirement income to have a comfortable retirement. Since Social Security replaces only about 40 percent of preretirement income for the average worker, it is important to have pensions, savings and investments. You should apply for benefits about three months before the date you want your benefits to start. If you are not quite ready to retire, but are thinking about doing so in the near future, you may want to visit Social Security’s website to use our convenient and informative retirement planner at www.socialsecurity.gov/retire.
Choosing when to retire is an important but personal decision. Regardless of the age you choose to retire, it is a good idea to contact Social Security in advance to learn the available options and make an informed decision. In some
cases, your choice of a retirement month could mean higher benefit payments for you and your family.
In deciding when to retire, it is important to remember that financial experts say you will need 70-80 percent of your preretirement income to have a comfortable retirement. Since Social Security replaces only about 40 percent of preretirement income for the average worker, it is important to have pensions, savings and investments. You should apply for benefits about three months before the date you want your benefits to start. If you are not quite ready to retire, but are thinking about doing so in the near future, you may want to visit Social Security’s website to use our convenient and informative retirement planner at www.socialsecurity.gov/retire.