Your Social Security benefit at age 65 is likely reduced
For many, turning 65 is a major milestone, as it is the age of Medicare eligibility. However, it's important to understand that for most Americans, age 65 is no longer the full retirement age (FRA) for Social Security. The FRA depends on your birth year, and for anyone born in 1960 or later, it is age 67. This means that claiming Social Security benefits at age 65, which is two years before your FRA, will result in a permanently reduced monthly payment. The longer you delay claiming benefits, up until age 70, the larger your monthly payment will be.
The key factors determining your payment
Several factors play a crucial role in calculating your personal Social Security benefit. The Social Security Administration (SSA) uses a formula that considers your highest 35 years of indexed earnings.
- Earnings History: The SSA calculates your Average Indexed Monthly Earnings (AIME) based on your highest 35 years of income. Years with no earnings are calculated as zero, which can lower your overall average.
- Claiming Age: Your monthly benefit is permanently reduced if you claim before your full retirement age. Conversely, it increases if you delay claiming until age 70.
- Birth Year: This determines your full retirement age (FRA). If you were born in 1958, your FRA is 66 and 8 months. If you were born in 1960 or later, your FRA is 67.
- Earnings While Receiving Benefits: If you work and claim benefits before your FRA, your benefits may be reduced if your earnings exceed a certain limit. Once you reach FRA, your benefits are no longer subject to this limit.
How claiming age impacts your benefits
The decision of when to start receiving Social Security is a key part of retirement planning. For those with an FRA of 67, claiming benefits at age 65 means accepting a permanent reduction, while waiting until age 70 can significantly increase your monthly payment.
- Early Retirement (Age 65): You would receive about 86.7% of your full benefit. This amount is permanently locked in, though it will receive cost-of-living adjustments (COLAs) in the future.
- Full Retirement Age (Age 67 for those born in 1960 or later): You would receive 100% of your primary insurance amount (PIA), which is your full benefit amount.
- Delayed Retirement (Age 70): You receive an additional 8% in delayed retirement credits for each year you wait past your FRA. This can result in a benefit that is 24% higher than your full benefit amount.
Comparison of benefit options at age 65
Here is a comparison illustrating the monthly payment difference for a hypothetical individual with a full retirement benefit of $2,000 per month (for those with an FRA of 67).
| Claiming Age | Monthly Benefit (Approximate) | Impact on Benefit | Total Lifetime Reduction/Increase (Approx.) |
|---|---|---|---|
| Age 65 | $1,734 | Permanently reduced by 13.3% | Lower total lifetime benefits compared to waiting longer. |
| Full Retirement Age (67) | $2,000 | Receive 100% of Primary Insurance Amount (PIA) | Standard benchmark for retirement benefits. |
| Age 70 | $2,480 | Includes an 8% increase per year from FRA | Higher total lifetime benefits, especially for those with longer life expectancies. |
How to get your personalized estimate
To find out exactly how much you will receive when you turn 65, the most reliable method is to use the official tools provided by the Social Security Administration. These tools use your actual earnings record to give you a personalized estimate.
- Create a my Social Security account: This is the best way to access your personal earnings record and get an accurate estimate of your future benefits. You can compare benefit estimates for different retirement ages (e.g., 65, 67, and 70).
- Use the SSA's Quick Calculator: This is a useful tool for getting a rough estimate without needing your full earnings record. You can input your earnings and see how your benefit changes based on when you plan to start collecting.
- Review your Social Security Statement: If you do not have an online account, you can request a copy of your Social Security Statement. It provides a detailed record of your earnings and estimates of your future benefits.
Conclusion
While many people associate retirement with age 65, for those born in 1960 or later, claiming Social Security at this age means accepting a reduced benefit. The amount you will receive depends on your specific earnings record and when you choose to claim. For the most accurate and personalized figures, establishing a my Social Security account on the SSA website is the best approach. This allows you to weigh the impact of claiming early versus delaying and make the most informed decision for your financial future. Waiting until full retirement age or later can significantly increase your monthly payment, providing greater financial security in your later years.
