What is the difference between early retirement and full retirement as it applies to Social Security retirement benefits?

By Steven Merkel AAA
A:

If you were born in 1929 or later, you'll need forty Social Security credits to be eligible for Social Security retirement benefits. You can earn up to four credits per year, which means that you will need to work at least ten years to become eligible for retirement benefits. Each year, the amount of earnings needed for a credit rises as average earnings levels rise. In 2009, you would receive one credit for each $1,090 of earnings, up to a maximum of four credits per year.

The earliest age at which you can begin collecting Social Security retirement benefits is age 62 - this is early retirement. If you decided to retire early, the benefits you receieve will be reduced. Full retirement has been age 65 for many years. However, beginning with people born in 1938 or after, that age will increase until it reaches age 67 for people born after 1959. Check out the Social Security Administration (www.ssa.gov) for a complete chart of full retirement ages based on your year of birth.

Social Security benefits are based on earnings averaged over most of a worker's lifetime. Your actual earnings are first adjusted or "indexed" to account for changes in average wages since the year the earnings were received. Then, the Social Security Administration (SSA) calculates your average monthly indexed earnings during the 35 years in which you earned the most. They apply a formula to these earnings and arrive at your basic benefit, or "primary insurance amount" (PIA). This is the amount you would receive at your full retirement age (age 65 or older). If you retire at an age earlier than your full retirement age, you'll receive a reduced benefit based on a formula used by the SSA.

Take a look at How Much Social Security Will You Get? to learn more.

This question was answered by Steven Merkel.

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