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.

RELATED FAQS

  1. What's the difference between Social Security Disability Insurance (SSDI) and Supplemental ...

    Both Social Security Disability Insurance and Supplemental Security Income are administered by the Social Security Administration, ...
  2. Will I pay taxes on my Social Security payouts?

    Find out if you're one of the people who has to pay federal income taxes on the Social Security benefit you receive.
  3. Can I deduct my Individual Retirement Account (IRA) contribution on my tax return?

    Whether you can deduct IRA contributions on your tax return depends on the type of IRA you have, your participation in an ...
  4. Can I contribute to a Roth IRA and still participate in my employer-sponsored retirement ...

    Find out the rules and limits on contributing to both a Roth IRA and employer-sponsored retirement plan.
RELATED TERMS
  1. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  2. To Fund

    A type of target-date retirement fund whose asset allocation ...
  3. Through Fund

    A type of target-date retirement fund whose asset allocation ...
  4. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...
  5. Drawdown Percentage

    The portion of a retirement account that a retiree withdraws ...
  6. Peri-Retirement

    A term for the period of time leading up to actual retirement. ...
comments powered by Disqus
Related Articles
  1. 5 Ways To Stretch Your Retirement Budget
    Budgeting

    5 Ways To Stretch Your Retirement Budget

  2. It's Never Too Early To Start Saving
    Savings

    It's Never Too Early To Start Saving

  3. 5 Tax(ing) Retirement Mistakes
    Retirement

    5 Tax(ing) Retirement Mistakes

  4. Payroll Deductions Pay Off
    Retirement

    Payroll Deductions Pay Off

  5. 10 Steps To Tax Preparation
    Taxes

    10 Steps To Tax Preparation

Trading Center