Making the decision to retire in the United States requires taking several factors into account, as having a work history alone is not enough. It is important to consider aspects such as the full retirement age, as this is the only age at which the Social Security Administration does not apply reductions to payments. This age has been set at 65, except for exceptions depending on the law signed by former President Ronald Reagan in 1983. According to data from USA Today, those born in 1960 will reach the full retirement age of 67 in 2027.
It is possible to start receiving retirement checks at 62, but as experts from NerdWallet indicate, monthly reductions of up to $300 apply. The highest amount that can be received is only possible if one reaches 70 years of work life, according to Charles Schwab. Therefore, it is important to seek professional advice in order to have a dignified retirement.
Planning your retirement
Planning for retirement is essential in the United States, as the process to follow fluctuates each year and the differences are considerable. According to the Social Security Administration, the full retirement age is 65, being the only age at which the administration does not apply withholdings. However, it is true that there are exceptions, stemming from the law signed by former President Ronald Reagan in 1983. Under it, the full retirement age gradually increases with the goal of continuing to fund Social Security for future generations.
For example, the full retirement age is actually 66 in 2025 and 2026 for people born between 1943 and 1954. According to information published by USA Today, those born in 1960 or later will reach the full retirement age of 67 in 2027. The problem lies in the fact that this information is not known by all retirees, which affects the amount they receive monthly. According to Social Security, the age at which retirees can start receiving money from Social Security is 62 years after registering at 61 years and nine months.
What should be done about it?
That is why it is important to plan for retirement and, in some cases, to combine it with work. According to experts from NerdWallet, monthly deductions for not reaching full retirement age can be up to $300: “For example, if a person is entitled to $1,000 per month at full retirement age, their monthly benefit could be reduced to $700 if they retire at 62”.
Data from AARP has also revealed that the monthly reduction rate can reach up to 30%. The only age that guarantees the ability to receive benefits without reductions and getting 124% of what would have been received by claiming the money in cash at full retirement age is 70, according to Charles Schwab. For all these reasons, it is advised that retirees and workers consult with a financial professional to plan their retirement in the best possible way, taking into account aspects such as the record, the years contributed, and the adjustments made by Social Security.
How to supplement retirement income?
There are alternatives that can provide extra income on top of the Social Security retirement check. Among them are:
- 401(k) Plans.
A 401(k) is a retirement account offered through employers, where contributions are tax-deferred. Maximizing your 401(k) contributions, especially if your employer offers a match, should be a priority. - IRAs.
An Individual Retirement Account (IRA) offers another avenue for retirement savings. Unlike a 401(k), an IRA isn’t tied to your employer, giving you more flexibility in your investment choices. Contributions to traditional IRAs are tax-deductible, and the funds grow tax-free until they are withdrawn, at which point they are taxed as income.
Frequently asked questions
At what age can I retire with full payment?
The official age depends on when you were born. Although the baseline was 65 years, for those born from 1960 onward, the full retirement age rises to 67 years (which they will reach in 2027). It is only at this age that you receive your money without the government taking anything away.
What happens if I decide to retire earlier, at 62?
You can do it, but you will receive much less money each month. Experts warn that your check could be reduced by up to 30% (about $300 less per month) for not waiting until full retirement age.
How can I receive the maximum amount of money?
To receive 124% of your benefit, you must wait until age 70. In addition to waiting, it is recommended to use additional plans like your company’s 401(k) or an IRA account to have more savings and live better.