Your Social Security Retirement Age May Not Be What You Think

People tend to think of age 65 as the "official" retirement age. That's because for many decades, 65 was the official retirement age for Social Security benefits, and employers often used it for company pensions as well. But nowadays, anyone who claims Social Security benefits at 65 will get less than they would if they had waited until the current full retirement age, suffering a permanent reduction in their monthly checks. Here's how to find out what your real retirement age is so that you can avoid a Social Security penalty.

Social Security's official full retirement age

If you open up your Social Security statement, you'll quickly see that there are three different figures listed for your retirement benefits. There is one benefits amount that applies if you claim Social Security at your full retirement age, a larger amount that applies if you claim your benefits at age 70, and a reduced amount for claiming benefits at age 62.

Your full retirement age is the earliest point at which you can get your full Social Security benefit. Start taking benefits earlier, and you'll be hit with the aforementioned penalty; wait until after full retirement age to claim Social Security, and you'll be awarded delayed retirement credits that will permanently increase your benefits. That's why knowing your full retirement age is so important – it allows you to come up with a retirement plan based on an accurate understanding of how much money you'll be getting from Social Security.

Full retirement age by birth date

There isn't any single full retirement age for everyone, because the official retirement age varies depending on your birth date. If you were born before 1943, then your full retirement age falls somewhere between 65 and 66 – which means that by now you've already passed that benchmark. Everyone born in 1960 or later has a full retirement age of 67. The full retirement ages for those born between 1943 and 1959 are as follows:

Data source: Social Security Administration.

How retirement age affects your benefits

Claiming your benefits any time before full retirement age means you'll get hit with a penalty based on how many months and years early you've filed your claim. That means that someone with a full retirement age of 67 who claims Social Security at 62 (the earliest possible age) would be hit with a bigger penalty than someone with a full retirement age of 66 who also claimed Social Security at 62.

Here's how claiming Social Security early would affect your benefits:

Data source: SSA.

If you claim your benefits on a date that falls in between these full years – say, if you're early by four years and ten months – then the reduction will fall in between the amount for those two years. For example, at four years and ten months early, the penalty would be 29.2%.

On the other hand, waiting until after full retirement age for your Social Security retirement benefits will result in a bonus to your benefits checks. Like the early retirement penalty, delayed retirement credits are based on how many months and years after full retirement age you started receiving your benefits. Delayed retirement credits stop accruing once you hit age 70, so it rarely makes sense to wait longer than that to claim your benefits.

If you were born after 1943, you'll accrue a bonus of 8% per year you wait after full retirement age. That works out to two-thirds of a percent per month, so if you claim your Social Security benefits 14 months after your full retirement age, you'd get a bonus of 9 1/3%.

Choosing your retirement date

Most people wait to retire until they claim their Social Security benefits because they need the money to live on. The goal for most retirees is to maximize their Social Security benefits, which would mean waiting until age 70 to retire. However, some people can't or won't wait that long. For example, if you get laid off at age 63, retirement might be your only option.

Don't feel that you must wait until age 70 to retire at all costs. Yes, your Social Security benefits will be smaller if you retire before then, but if waiting that long would take a toll on your physical or emotional well-being, then your best course of action is to take the money and run.