A lot of the considerations for retirement come from your situation in life. Have you been saving from a young age? Did you make a living wage for most of your adult life? Do you have a partner who is contributing financially to your retirement? Are you the higher earner of the pair?
The answers to these questions will help you get a good start on planning your retirement. Another vital component when it comes to financially planning for your retirement is the amount of your Social Security checks. Depending on what you earned or how much your partner earned during their lifetime, you may have a significant portion of your budget accounted for by Social Security benefits.
The Social Security Administration taxes your income throughout your life to help pay for the benefits of aging and disabled Americans. When you become old enough to start claiming your benefits, the wages of the young workforce will pay for a portion of your retirement. The amount you receive each month is calculated based on your 35 highest earning years.
To get the highest benefits available, you can wait to claim your benefits until your full retirement age or age 70 at most. The time you choose to claim your benefits can impact your benefits by around 30%.
You can first claim your Social Security benefits at age 62. This is considered early retirement. Claiming your benefits at this age will lead to a reduction in the amount of your Social Security check. For early retirement, your benefits are reduced by 5/9 of one percent for each month before full retirement age, for up to 36 months. Beyond 36 months early, each month reduces your benefits by 5/12 of one percent.
People who have a full retirement age of 67 will find themselves receiving a benefit which has been reduced by 30% when they claim their benefits at age 62 (36 months at 5/9 of one percent, plus 24 months at 5/12 of one percent).
Full Retirement Age
If you were born in 1960 or later, your full retirement age is 67. This is also called your normal retirement age (NRA). At this age, you can claim your Social Security benefits and receive the full amount with no reduction. This full amount is called the primary insurance amount. Most beneficiaries will choose to claim their benefits at age 67 or delay their retirement.
Maximum Retirement Age
Choosing to delay retirement is a common method for increasing your Social Security benefits. For each year after your full retirement age that you wait to claim your benefits, your benefit will increase by 8%, up until age 70.
This option is best suited for people in good health. You must also be insured to receive the benefits of delayed retirement. If possible, the higher earner in a married couple should elect to delay their retirement. This will help to maximize the Social Security benefits going to the household.
For more help in planning for your retirement, contact the Federal Employee Service Association.