retirement. It’s probably on the minds of most Americans in their late 50s or early 60s. That’s natural. In fact, it’s also a good idea to think about, and especially plan for, retirement at an earlier age.
But as you near retirement, the big decision is exactly when to make the transition. The level of Social Security benefits at different ages is probably an important consideration.
According to the Social Security Administration (SSA), the most common age to receive Social Security benefits is 62 years old. This is the earliest age you can receive benefits. The second most popular age is he is 67 years old, which is his full retirement age (FRA) for those born after 1960. How do the average Social Security benefits for a 62-year-old compare to a 67-year-old?
The most recent SSA data available on average Social Security benefits by age for retired workers is as of the end of June 2023. And it shows a clear difference between receiving benefits at age 62 and him receiving benefits at age 67.
A 62-year-old retired worker receives an average monthly benefit of $1,277 (all figures rounded to the nearest dollar). A 67-year-old retired worker’s average monthly Social Security benefit was more than 44% higher at her $1,844.
SSA also provided average benefits by gender. A 62-year-old male retired worker received an average monthly benefit of $1,419. This average for a 67-year-old male retired worker increased by nearly 45% to his $2,052. The average monthly benefit a 62-year-old female retired worker received was her $1,145, compared to a 67-year-old woman’s $1,454.
These averages vary somewhat from month to month. All numbers will also increase in 2024, thanks to Social Security’s 3.2% cost of living adjustment (COLA). However, no matter how the average changes, the large difference between the 62-year-old and her 67-year-old remains.
Social Security early retirement penalty
There’s a simple reason behind the large difference in average benefits for retired workers aged 62 and 67. Social Security has penalties for early retirement.
If you receive Social Security retirement benefits each month before you reach full retirement age, the amount you receive will be reduced by five-ninths of one percent. If you begin receiving benefits more than 36 months before your FRA, an additional penalty of 5/12 of 1% per month will apply. Without doing all the math, this means that if you collect Social Security benefits at age 62, your benefits will be reduced by 30% compared to if you waited until age 67.
By the way, Social Security also offers financial incentives for waiting to receive benefits. rear your FRA. Your monthly retirement benefit increases by 8% each year until age 70.
Other factors to consider
Your monthly Social Security benefits at age 62 can be more than 30% lower than if you waited until age 67. SSA will use his 35 years of highest income to calculate benefits. Many Americans will earn more in their later years than they did early in their careers.
If you continue to work while collecting Social Security retirement benefits at age 62, the SSA may “catch back” some of your income. In 2024, $1 for every $2 he earns over $22,320 will be deducted from his benefits. In the year you reach your FRA, you’ll deduct $1 for every $3 you earn over $59,520. You’ll get your money back, but only after you reach your FRA.
Don’t forget your health insurance premiums. If you retire at age 62, you will likely have to pay for your health insurance in full. However, if you wait until age 65, you can become eligible for Medicare.