A:

On August 14, 1935, U.S. President Roosevelt signed into law the Social Security Act, a social insurance program designed to pay retired workers a continuing income. Over the years, Social Security has evolved to pay four different types of benefits:

  • Retirement
  • Disability
  • Family
  • Survivors

Most American workers include Social Security as part of their retirement plans. As you work and pay Social Security (FICA) taxes, you earn “credits” toward Social Security retirement benefits. In general, you need 40 credits, or about 10 years of work, to be eligible to receive Social Security retirement benefits. The amount of your benefit is based on how much you earned while working, and the age at which you begin receiving benefits.

The earliest you can start receiving Social Security retirement benefits is when you turn 62, but your monthly amount will be permanently reduced. Your full retirement age is the age at which you can start collecting full or unreduced benefits (the maximum payout), and it is based on the year in which you were born. The following table shows the full retirement age for various birth years:

Birth Year

Full Retirement Age

1937 or earlier

65

1938

65 and 2 months

1939

65 and 4 months

1940

65 and 6 months

1941

65 and 8 months

1942

65 and 10 months

1943-1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 and later

67

You will receive close to the same lifetime benefit whether you start receiving benefits at age 62, full retirement age, or age 70 if you live to the average life expectancy for someone your age. That’s because if you start early, you will receive lower monthly payments for a longer period of time, and if you delay benefits, you will receive higher monthly payments for a shorter period of time. The Social Security Administration web site has a Retirement Planner that gives detailed information about retirement benefits under current law. You can find information on your life expectancy, how your family members may qualify for benefits, and use benefit calculators to test different retirement ages or future earnings amount. Check it out at www.ssa.gov/retire2.

RELATED FAQS
  1. How are Social Security benefits affected by your income?

    Understand the relationship between a worker's earned income and benefits he or she receives from Social Security in retirement, ... Read Answer >>
Related Articles
  1. Financial Advisor

    10 Things You Need to Know About Social Security

    Every saver should know these ten things about Social Security retirement benefits.
  2. Retirement

    Retiring Early: How Long Should You Wait?

    Maximize your Social Security benefits by choosing when you retire.
  3. Financial Advisor

    Top Tips for Maximizing Social Security

    Between delaying filing, claiming strategies and taking advantage of special marital benefits, there are several ways to maximize Social Security.
  4. Retirement

    Understanding Social Security Eligibility

    Who qualifies for Social Security payments and when can they get them?
  5. Financial Advisor

    What Will My Social Security Check Look Like?

    It's important to know what your Social Security check will look like in retirement. Here's how you can figure it out.
  6. Retirement

    How Social Security Works After Retirement

    Millions of Baby Boomers are looking forward to collecting benefits, but several factors can affect how much they get and whether the money is taxed.
  7. Retirement

    4 Reasons to Collect Social Security Payments Now

    The longer you wait to collect Social Security, the more you get. But for people who are in failing health or need income, delaying isn't the best option.
  8. Retirement

    How Social Security Benefits Are Estimated & Taxed

    The Social Security check you'll get depends on your work history, when you start claiming a benefit and these other factors.
  9. Retirement

    Ten Social Security Questions Everyone Asks

    The average American doesn’t know enough about Social Security. Here are answers to 10 of the more common questions people ask about our retirement system.
RELATED TERMS
  1. Do-Over Option

    Allows Social Security recipients to remove their original application ...
  2. Social Security Tax

    The tax levied on both employers and employees used to fund the ...
  3. Benefit Offset

    A reduction in the amount of benefit payments received by a member ...
  4. Unit Benefit Plan

    An employer-sponsored pension plan that provides retirement benefits ...
  5. Provident Fund

    A compulsory, government-managed retirement savings scheme used ...
  6. Covered Earnings

    The total amount of an employee's pay that is eligible for use ...
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  3. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  4. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  5. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  6. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
Trading Center