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Full Retirement Age – What is Retirement Age In The USA?

What Is the Full Retirement Age (FRA) in the USA?

Full Retirement AgeFull retirement age (FRA) in the USA ranges from age 65-67 when workers can claim full, unreduced Social Security retired-worker benefits.

The full retirement age (FRA), is often known as the normal retirement age.   It is the age at which persons can retire and receive full retirement benefits. In the United States, for example, the FRA for collecting Social Security payments is 66 for those born between 1943 and 1954.  However, it is 67 years of age for those born in 1960 or later.  66 plus two, four, six, eight, or ten months for those born between 1955 and 1959. Between 1955 and 1959 the age increases by two months each successive year. Why does it matter?  because claiming benefits before your FRA will reduce your benefit.  Whereas claiming after your FRA will boost the amount by 8% annually, adjusted in monthly increments of 0.6-0.7 percent.  The maximum benefit a person can receive comes at age 70.

According to the Social Security Administration, your full retirement age is the age at which you are eligible to receive the full amount of benefits earned throughout your career. However, this is not the same age at which you will obtain the greatest monthly benefit. In recent decades, determining the ideal timing to begin receiving Social Security payments has become a more difficult task. Technically, you can start receiving these benefits as soon as you are 62 but receiving a reduced benefit.  Or, you can wait until you’re 70 to receive the maximum benefit for which you are entitled. Your full retirement age is the age at which you can collect all of the benefits you have earned during your working years. You can technically retire and begin receiving Social Security payments at the age of 62.

Average Retirement Age in the U.S.A.

Everyone had the same full retirement age of 65 for the first several decades of the Social Security program. However, in 1983, Congress introduced revisions that would allow the typical retirement age to rise over time. Congressional leaders believed that a gradual increase in the full retirement age was required to ensure that there was enough money to protect Social Security from going bankrupt.

However, when you retire is not dictated by Social Security or retirement plan restrictions. What is best is determined by each individual and their particular situations. According to different sources, the average retirement age in the USA is:

  • Federal Reserve, the average retirement age is 62. Interestingly, this coincides with the earliest age at which you are entitled to collect Social Security. According to the Federal Reserve’s 2019-2020 report on the Economic Well-Being of U.S. Households, half of the respondents retired before the age of 62. Almost one-fourth of retirees were between the ages of 62 and 64.
  • Insured Retirement Institute‘s 2019 poll, 24 percent of baby boomers plan to retire before the age of 65, 29 percent plan to retire between the ages of 65 and 69, and 26 percent plan to retire at the age of 70 or beyond. Another 8% indicated they have no plans to retire.
  • Gallup poll of nonretired Americans conducted in 2018, the typical person plans to retire at the age of 66.

How to Calculate Full Retirement Age for Social Security

Not everyone reaches full retirement age at the same time. The age at which you become eligible for full Social Security payments is determined by the year you were born.

  • 65 – FRA for those born before 1943
  • 66 – FRA if you were born between 1943 and 1954.
  • 66-67 – Anyone born between 1955 and 1959 has a regular retirement age of 66 to 67, or 66 plus a specified number of months. If you were born in 1958, for example, your complete retirement age is 66 and eight months.
  • 67 if you were born in 1960 or later.

Your normal retirement age may also be affected by the day you were born. If you were born on January 1, you can still apply for full retirement for those born a year before you. If you were born on the first of any month, your FRA will be the same as someone born the month before. For example, if you meet your FRA on June 1, you’ll earn full benefits for the month of May, as well.

Full Retirement Age vs Maximum Benefit

The Social Security Administration uses a formula to determine the amount of your monthly benefit check.  This is known as your primary insurance amount (PIA). The calculation is a little complicated, but it takes into account your 35 top years of earnings, each of which is indexed for inflation. Your full retirement age determines when you’re eligible to receive your PIA. As a result, if you choose to receive benefits before your FRA, you will receive a smaller monthly benefit.

Conversely, if you wait until after your FRA to elect, you’ll receive a higher benefit. Your monthly payment will grow incrementally for each month you delay from the age of 62 until your FRA. If you were born in 1960 or later, for example, you can collect 86.1 percent of your benefits at the age of 64 and 11 months. Once you reach the age of 65 and 10 months, you can collect 92.2 percent of your benefits.

Many retirees fail to understand that the amount they can receive at full retirement age is not actually the maximum possible benefit. Retirees can continue to postpone benefits past the FRA.  As a result, the benefit amount will continue to increase. However, the pension amount hits its maximum limit once you reach the age of 70.

Full Retirement Age (FRA) – Considerations

Your full retirement age is important for other reasons.

  • Extra earned income can affect benefit – If you work and get Social Security benefits before reaching your full retirement age, the Social Security Administration (SSA) may withhold some money from your benefit amount. In 2019, your benefit will be decreased by $1 for every $2 you earn beyond the $17,640 earnings cap. In 2020, the earnings cap will be raised to $18,240. However, once you reach full retirement age, you can earn as much money as you like without affecting your Social Security income.
  • Vesting for other pensions – FRA also applies to pension schemes, such as those offered by employers. For minimum vesting purposes, the Internal Revenue Service (IRS) defines FRA as “the earlier of (A) the time a plan member attains normal retirement age under the plan or (B) the later of age 65 or the fifth anniversary of the time a plan participant begins participating in the plan.” For example, public officials, police officers, and military members often receive full benefits after a specified number of service years.  Vesting and benefits are not tied to a specific age.

Full Retirement Age (FRA) Changes

Amendments in 1983 to Social Security included a provision that allowed raising the FRA beginning with people born in 1938 or later. Improvements in the overall health of older people and increased life expectancy prompted the change. The Social Security Administration provides a calculator that will determine an individual’s FRA and estimate their benefits.

 Full retirement age (FRA) has already increased from 65 years old to 66 and 2 months and will rise incrementally over the next several years to 67. These changes were mandated by Congress in 1983 as part of a law that strengthened Social Security’s finances. Congress cited improvements in the health of older people and increases in life expectancy as reasons for raising the retirement age. That law raised the full retirement age, which had been 65 since the inception of Social Security in the 1930s, to 66 for people born between 1943 and 1954. For those born in born in 1955, it is 66 and 2 months. FRA inches up to 66 and 4 months for someone born in 1957, 66 and 6 months for a 1958 baby, and so on, until it settles at 67 for people born in 1960 or later. (Source: aarp.org)

FRA – FAQ

Can I continue to work and receive Social Security benefits at age 62 (before FRA)?

Retirees can work while receiving Social Security benefits.  However, those under the age of 65 must pass the retirement earnings test (RET). Under this test, if your salaries exceed a certain limit (which changes annually), you will temporarily lose part or all of your benefits. When you reach full retirement age, your benefit is recalculated, and you may be eligible for a portion of it to be returned to you.

Can I work after full retirement age?

Yes, you can work after full retirement age and earn as much as you’d like without the amount of your Social Security benefits being affected at all.

How much can I earn if I work after my FRA?

You may work and earn as much as you like if you continue to work after reaching full retirement age. You will not be subject to the retirement earnings test.  Further, your Social Security payments will not be affected. If you worked previously to FRA, you may have to give up some of your benefits.  It all depends on if you earned more than the annual criteria. Your benefit amount, however, will be revised at full retirement age.  This is to account for the majority of those forfeited amounts.

Can work after full retirement age increase Social Security benefits?

Maybe.  Working after reaching full retirement age may result in an increase in your Social Security benefits. Your benefits are calculated using the average wage for your 35 highest-earning years.  These are adjusted for inflation. Even if you’ve reached full retirement age and have already filed for benefits, the Social Security Administration will recalculate your average annual wage to account for new earnings. If your earnings after FRA are higher than in previous years, raising your average wage for your 35 highest-earning years, your benefits may increase proportionally.

Up Next: After Hours Trading – Who is Allowed to Trade After Hours?

After Hours TradingAfter-hours trading, or extended hours trading refers to the time outside regular trading hours when an investor can buy and sell securities.

The main trading session for most stock markets occurs throughout the day. A trading session is the period of time during which trading activity takes place.  One session represents a single day of operations. The opening bell signifies that the market is open for business and the start of the session. Similarly, the trading day concludes with the sound of the closing bell. The majority of transactions occur between the opening bell and the closing bell. However, trade activity is not only limited to this timeframe. It does, in fact, occur after the market closes, after normal business hours have concluded. This is referred to as the after-hours trading session. However, there are some significant changes between the regular day and the after-hours activity.

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