Did you know that in 1983, Congress was concerned with the cost of Social Security? Back then, Congress passed a law which has slowly been taking effect. What did Congress do? They pushed back the age when you are eligible to receive your full Social Security retirement benefit.
There are now 13 different age brackets that are used to determine when you are eligible for full Social Security retirement benefits. If you were born before 1938, your full retirement age was 65. For people born between 1938 and 1942, your full retirement age was between age 65 and 66. For people born between 1943 and 1954, you retirement age is 66. For people born between 1955 and 1959, your full retirement age is between age 66 and 67. And finally for people born in 1960 and later, your full retirement age is currently 67 years old.
But you can still retire at age 62, right? Yes, you can, but your retirement benefit will be less than your full retirement benefit by about 30%…FOREVER! No matter when you decide to take Social Security, once you file, your benefits are locked in for the rest of your life. If you file early, you are locking in your benefits for the only cost of living adjusted annuity you will have.
Social Security is like an annuity with one big benefit, current law adjusts your Social Security benefits with a cost of livings adjustment. This allows your benefit to grow in accordance with the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Once you reach your full retirement age, it doesn’t mean that you have to start taking Social Security. You can delay your retirement benefit. If you do delay your benefit, it will grow by 8% a year until you reach age 70. At age 70, your retirement benefit is considered “maxed out”. It does not make any sense to delay filing after that point.
If you really think about it, in order to receive your true “Full Retirement Benefit”, you should wait until 70 years old to file for Social Security. Of course, you should take other factors into account (life expectancy, income after 65, etc.), but with improvements in healthcare, we need to plan for long lives ahead of us.