Early and Delayed Social Security Benefits
The normal retirement age to receive full Social Security retirement benefits depends on the year in which you were born. (see our article, Social Security: Normal Retirement Age). However, it is possible to receive retirement benefits as early as age 62 or to delay receiving benefits until age 70.
Early Benefits
If you decide to retire early, your Social Security benefits will be reduced by a certain percentage:
- 5/9 of 1% for each month of the normal retirement age, up to 36 months
- 5/12 of 1% for each month of the normal retirement age, after 36 months
For example, your normal retirement age would be 67, but you decide to retire at age 62, so you are retiring 5 years, or 60 months, early. The first 36 months would be reduced by 20% (5/9 of 36%). The remaining 24 months would be reduced by 10% (5/12 of 24%). The total benefit reduction would be 30%.
Delayed Benefits
If you decide to delay your retirement after your normal retirement age, credit is given so that your benefits will increase; however, no credit is given after age 69. The following table shows the delayed retirement credit based on year of birth:
| Year of Birth |
Credit per Year |
| 1924 |
3.0% |
| 1925-1926 |
3.5% |
| 1927-1928 |
4.0% |
| 1929-1930 |
4.5% |
| 1931-1932 |
5.0% |
| 1933-1934 |
5.5% |
| 1935-1936 |
6.0% |
| 1937-1938 |
6.5% |
| 1939-1940 |
7.0% |
| 1941-1942 |
7.5% |
| 1943 and later |
8.0% |
Note: Persons born on January 1 of any year should refer to the credit percentage for the previous year.
For example, you were born in 1940, so your normal age of retirement is 65½. However, you decide to delay retirement until age 68. According to the above table, your credit is 7% per year. When you subtract your normal age of retirement from your actual retirement age, you get 2½ . Multiply this times the credit of 7% and you get an increased retirement benefit of 17.5% higher than your full Social Security benefit.
The following chart from the February 2002 issue of the AAII Journal summarizes the reductions and credits for early and delayed benefits.
| Social
Security Reductions for Early Benefits and Credits for Delayed Benefits |
| Year of Birth* |
|
|
|
Age 62 Benefits as % of Full Age Retirement Benefits |
|
Age 70 Benefits as % of Full Age Retirement Benefits |
| 1936 or prior |
|
|
|
80% |
|
130% |
| 1937 |
|
|
|
80% |
|
132 1/2% |
| 1938 |
|
|
|
79 1/6% |
|
131 5/12% |
| 1939 |
|
|
|
78 1/3% |
|
132 2/3% |
| 1940 |
|
|
|
77 1/2% |
|
131 1/2% |
| 1941 |
|
|
|
76 2/3 % |
|
132 1/2% |
| 1942 |
|
|
|
75 5/6% |
|
131 1/4% |
| 1943–54 |
|
|
|
75% |
|
132% |
| 1955 |
|
|
|
74 1/6% |
|
130 2/3% |
| 1956 |
|
|
|
73 1/3% |
|
129 1/3% |
| 1957 |
|
|
|
72 1/2% |
|
128% |
| 1958 |
|
|
|
71 2/3% |
|
126 2/3% |
| 1959 |
|
|
|
70 5/6% |
|
125 1/3% |
| 1960 or later |
|
|
|
70% |
|
124% |
| *Social Security considers people
born on January 1 to have been born in the prior year. |
| Source: Jennings and Reichenstein,
“Estimating the Value of Social Security Retirement Benefits,”
Journal of Wealth Management, Winter 2001, p. 14–29. |
