How often do you think about when you can fully retire? You may have heard of the Social Security Administration (SSA) and its programs, depending on your background and how you were raised. But if not, you might think of the full retirement age as just another confusing word that has to do with the job that you have to pay for with some of your monthly pay.
On the other hand, if you do not know how Social Security works, your future checks may be smaller. The most important thing is that you understand the system’s complexities as soon as possible. Only then can you make plans for how to reach your retirement goals. Otherwise, you will not have as many choices in retirement, which will make it less flexible.
What is the full retirement age?
As a general rule, the full retirement age is when the Social Security Administration (SSA) says you can get the most out of your contributions to the system. It is important to know how retirement insurance works in order to understand it.
You probably know about the monthly payments that are taken out of your paycheck to pay for Social Security taxes. You send these payments to the SSA so that you can get credits from Social Security all year long.
The second thing is how old you are. For the system to work well, it needs both money to grow and a clear plan for who will retire. The fund would go bankrupt if everyone who had earned enough Social Security credits retired.
This would mean that a lot fewer people would be working. Because of this, the Social Security Administration has set an ideal retirement age based on actuarial calculations. This age is called the “Full Retirement Age.”
Who will reach the full retirement age in 2025?
The Full Retirement Age is not a set number for everyone. Instead, it was made to be a number that can change over time as people get closer to 67 years old. The SSA says the following:
Year of Birth Full Retirement Age (FRA)
- 1943–1954: 66 years
- 1955, 66 years and 2 months
- 1956 66 years and 4 months
- 1957 66 years and 6 months
- 1958, 66 years and 8 months
- 1959, 66 years and 10 months
- 1960 or later, 67 years
What happens if you don’t decide to retire at your full retirement age?
There are many problems that could happen if you do not retire when you are supposed to. Before anything else, you should know that this is not the only age at which you can retire; it is just a time gap.
You can retire as early as 62 years old, which is the Early Retirement Age. If the Social Security Administration let you retire, your monthly benefits would be cut by up to 30% as a punishment.
This deduction goes down as you get closer to full retirement age and put off retiring. Also, this will depend on whether you have the money to make enough positive cash flow so that you do not have to retire at that time.
When you reach retirement age, the amount of money you get from Social Security will be equal to 100% of the taxes you paid, based on current prices.
If you can wait longer, the SSA will reward you by adding almost 32% more to your possible benefits every month you wait. In this case, you reach the maximum retirement age (MRA), which is 70 years old.
But what happens if you do not start the process of getting your Social Security back when you turn 70? Getting your benefits raised is the first thing that stops because the SSA will only think about it until you reach the MRA. Second, you will have to pay for Part B of your Medicare coverage out of your own pocket. Third, other people, like your family or dependents, will not be able to get the benefits that come with your account.