The retirement age when Americans can claim the full benefits earned over their years of laboring from the Social Security Administration is gradually getting higher. Currently, those who were born in 1960 and after will need to wait until they are 67 years old, and one month, to reach the full retirement age.
Beneficiaries can start earlier, but at the cost of reduced monthly payments in their golden years.
Retiring before full retirement age reduces benefits
For many years until 1983, the full retirement age, also known as the “normal retirement age,” was 65. However, as the US population’s health and life expectancy increased, as well as high inflation raising benefits, the viability of the Social Security Trust Funds was put at risk. To correct this, Congress passed a law to gradually raise when a beneficiary could claim their full benefit.
Nowadays, collecting benefits starting at age 62 could see your monthly payments permanently cut by almost a third for those born in or after 1960. The full retirement age is gradually rising from 66 for those born in 1954 and before to 67 for those born in 1960 and later. Technically, you need to tack on another month to the full retirement age being that you need to be the set age throughout the first month of retirement.
Average Social Security retirement benefits in 2022
The amount that you can receive when you retire is determined by a few main factors. The Social Security Administration looks at your 35 highest-income years and calculates the average. Then that number is plugged into a formula, taking into consideration at what age you retire, that will determine your primary insurance amount (PIA). You can use the Social Security Administration’s calculator to see what your benefits could be.
The maximum monthly payment amount in 2022 for those that have reached full retirement age when they file rose to $3,345, up $197 from the year before. Social Security payments are indexed to take into account inflation so that it doesn’t erode the purchasing power of monthly benefits. High inflation in the wake of the covid-19 crisis saw the largest cost-of-living adjustment in years, at 5.9 percent, for 2022.
However, not everyone receives the maximum amount and if you choose to retire at 65 this year you’ll take at least a 10 percent hit on benefits. The average beneficiary who begins collecting from their Social Security retirement fund will receive $1,658 per month in 2022.
Those who choose to keep working until they have to claim their Social Security benefits at age 70, could have a shot at $4,194 each month, the maximum monthly payment in 2022. While those who file at age 62 this year will have their payments top out at $2,364.