One segment of Social Security is a supplemental retirement system that requires contributions in the form of payroll taxes. Eligibility for collecting Social Security includes age, length of employment and contributions into the system. You must be at least 62 to receive retirement benefits, you must have worked at least 40 quarters over your total working life and you must have paid into Social Security through payroll deductions.
Social Security benefits are calculated based on your lifetime earnings. After your earnings are adjusted to account for wage inflation, Social Security calculates your average adjusted monthly earnings over your highest 35 years. Social Security then uses this information to calculate the basic benefit to which you are entitled. If you worked fewer than 35 years, the formula puts 0 in for those years without earnings. So in general you will receive higher benefits if you work the full 35 years. People whose wages increase during their working life may receive higher benefits by working more than 35 years.
Full Retirement Age
For Social Security purposes, full retirement age depends on your date of birth. If you were born in 1937 or before, full retirement age is 65. If your birth year is between 1937 and 1943 your full retirement age increases incrementally. Between 1943 and 1954 full retirement is 66 with similar increases between 1955 and 1960. Those born in 1960 or later reach full retirement age at 67. Retirement age for those born on January 1 is based on the prior year.
Delaying Benefits Increases Payout
You can begin collecting reduced benefits as early as age 62. After age 62 your benefit will increase each year that you delay taking benefits until you reach age 70. Benefits will not decrease if you stop working at age 62 and defer taking benefits. However, continuing work after age 62 or delaying receiving benefits may result in increased future benefits.
Social Security Planning Tools
The decision about when to start taking benefits depends on your personal financial situation. If you live to the average life expectancy, you should expect to receive about the same total benefit either whether you opt to take early benefits or delay. Each year Social Security sends you a statement that shows your expected benefit at age 62, at full retirement age and at age 70. The Social Security website has planning tools to help you decide what would work best for you and your family (see Resources).
- The Concord Coalition: What is Social Security?
- Doughroller: What is Social Security?
- Social Security Online: Your Retirement Benefit: How It Is Figured
- Social Security Online: Full Retirement Age
- Social Security Online: Delayed Retirement Credits
- FDR Library: Our Documents: The Social Security Act
- Social Security Administration. "If You Were Born in 1960 Your Full Retirement Age Is 67." Accessed April 14, 2020.
- Social Security Administration. "Benefits Planner: Survivors | Planning for Your Survivors." Accessed April 14, 2020.
- Social Security Administration. "Getting Benefits While Working." Accessed April 14, 2020.
- Social Security Administration. "Early or Late Retirement." Accessed April 14, 2020.
- Social Security Administration. "Delayed Retirement Credits." Accessed April 14, 2020.
- Social Security Administration. "If You Were Born Between 1943 and 1954 Your Full Retirement Age Is 66." Accessed April 14, 2020.
Based in Newport, R.I., Stephen Whitney has been writing since 2007. He is a retired executive with 25 years experience in the computer industry. Whitney holds a Bachelor of Arts in psychology from Boston University and a Master of Business Administration from Northeastern University.