What is the Retirement Age in the US? Why Are There Multiple Ages?

You work your entire life to be able to reach the golden years of retirement, but when do those golden years actually begin? Though the U.S government doesn’t impose a required retirement age, your investment profits and Social Security retirement benefits may fluctuate based upon your age of retirement.

This is why there are five specific ages of retirement that most Americans consider. It’s important to understand the implications of retiring early, “on time”, or late, especially in the context of your own financial retirement plans.

Retiring at 59.5

Until you turn 59 ½, you’re forced to pay a penalty for any money you withdraw from your retirement savings such as 401(k)s and IRAs. If your retirement plans hinge largely on your investments, you may be able to begin your retirement process shortly before your 60th before without paying harsh penalties.

Retiring at 62

Regardless of how many years you’ve worked, you’re not eligible to collect Social Security retirement benefits until age 62. However, just because you can doesn’t mean you should. The Social Security Administration reduces the benefits you receive for each month that you retire before your full retirement date.

For example, if you were born in 1959, the SSA identifies your “full” retirement age as 66 and 10 months. By retiring at age 62 instead, you take yourself out of the workforce 58 months early. As a result, your lifetime benefits will be reduced by 29.17%. In 2020, the highest benefits payment available for someone who files for retirement at age 62 is $2,265 per month.

By age 65, you hit three important retirement landmarks:
Depending on your year of birth, you’re within reach of your “full” Social Security retirement age
You’re eligible for Medicare, regardless of whether you’ve filed for Social Security benefits
Many companies consider 65 as the full age of retirement for their own retirement plans

Even if you’re not ready to file for Social Security benefits at the age of 65, make sure you apply for your Medicare benefits within three months of your 65th birthday. If you wait longer, medical insurance and prescription drug coverage may cost you more.

Retiring at 66

The full retirement age increases slightly each year. As a result, Americans born between 1943 and 1959 reach the full retirement threshold at the age of 66, but people born in 1960 or after don’t qualify for full retirement benefits until age 67.

Once you’ve reached your full age, you can apply for Social Security benefits without any fear of penalties. Keep in mind that your benefit payment is calculated based on how much you earned during your working career. According to the SSA, “higher earnings result in higher benefits.” In 2020, the highest benefits payment available for someone who files at full retirement age is $3,011 per month.

Retiring at 70

Some people prefer to wait until age 70 to officially retire. The Social Security Administration calls this “delayed retirement”. Adults who wait until after their full retirement age to file for benefits receive delayed retirement benefits. The amount of extra benefits depends on the year you were born. For example, anybody born after 1943 earns an extra 8% in benefits for each full year of delayed retirement.

In 2020, the maximum someone can earn by filing at age 70 is $3,790 per month.

Bottom Line

There’s no “right” or “wrong” age to retire. Each of the five main retirement ages offers its own benefits and drawbacks. Make sure you crunch your numbers carefully and seek advice from a financial professional to determine the best course of action for your own retirement plans.