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Throughout your working career, you pay employment taxes that help fund Social Security, which provides income when you retire. In 2023, nearly 67 million people will receive Social Security benefits, collectively totaling more than $1 trillion.

There are strict rules about when you can claim Social Security benefits. You can start collecting retirement benefits as early as age 62, but if you can delay claiming your benefits, your monthly benefit amount can continue growing until you reach age 70.

Learn more about Social Security benefits, early retirement age, and the advantages and disadvantages of filing for your benefits early and late.

What Are Social Security Benefits?

Social Security is a social insurance program created in 1935 to pay workers an income once they retired at age 65 or older. When people talk about Social Security benefits, they’re referring to a monthly payment that replaces a portion of a worker’s pre-retirement income.

The amount you receive depends on how much you earned and paid in Social Security taxes during the 35 highest-earning years of your career. Generally speaking, the higher your income, the bigger your monthly check will be — up to a point. Also important is the age at which you claim benefits. Typically, the later you receive benefits, the higher your monthly check will be.

Note that retirees aren’t the only ones who are eligible for Social Security benefits. People with qualifying disabilities, surviving spouses of workers who have died, and dependent beneficiaries may also qualify for benefits.

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At What Age Can You Collect Social Security?

When the Social Security program began, the full retirement age (FRA) was 65, and that’s still what many in the U.S. think of as the average retirement age. However, as life expectancy in the U.S. has increased, the Social Security Administration (SSA) has adjusted the FRA accordingly.

The chart below illustrates FRA by year of birth.

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What Is the Early Retirement Age for Social Security?

You can choose to claim retirement benefits as early as age 62. However, SSA will reduce your benefit by about 0.5% for every month you receive benefits before your FRA. For example, if your full retirement age is 67 and you file for Social Security benefits when you’re 62, you’d receive around 70% of your benefit.

On the other hand, if you wait to claim benefits after your FRA, you’ll accrue delayed retirement credits. This increases your benefit a certain percentage for every month you delay after your FRA. For example, if your full retirement age is 67 and you delay receiving benefits until age 70, you’ll get 124% of your monthly benefits. Note that the benefit increase stops when you turn 70.

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Can You Claim Social Security While You’re Still Working?

When you claim your Social Security benefits, the SSA considers you retired. However, you can continue working after retirement and receiving benefits at the same time, though they may be limited.

If you’re younger than FRA for the entire year, the SSA will deduct $1 from your payment for every $2 you earn above an annual limit. In 2023, that limit is $21,240. In the year you reach full retirement age, the SSA will begin deducting $1 for every $3 you make above a different earnings limit — $56,520 in 2023.

No matter their work history, your spouse has the option to claim Social Security benefits based on your work record. That benefit can be up to 50% of your primary insurance amount, which is the benefit you’d receive at FRA. Your spouse can begin receiving spousal benefits at age 62, but they will receive a reduced benefit.

Pros and Cons of Claiming Social Security Early

The main advantage of filing for Social Security early is that you’ll have access to retirement funds sooner. This can be a boon to individuals who need extra money to get by each month. To help you maximize every last dollar, consider using a spending app to create budgets, track spending, and monitor bills.

The main disadvantage of filing early is that you may permanently reduce your monthly benefit amount. This could be a factor to keep in mind as you determine whether you’re on track for retirement.

So how do you decide when to file for your benefits? Consider your “break-even point.” This is the age at which receiving a delayed higher benefit outweighs claiming benefits earlier.

Here’s an example of how that works. Let’s say your FRA is 67 and your annual benefit is $24,000. If you claim your benefit at age 62, your benefit drops to $16,800 a year. If you delay until age 70, your benefit would be $29,760 a year.

By adding up each year’s worth of benefits and comparing them across different potential retirement ages, you find your break-even point. So in that last example, claiming your benefit at FRA breaks even with early filing at age 78. If you expect to live until this age or longer, you may consider filing for Social Security at full retirement age. Delaying until age 70 breaks even with claiming at FRA at age 82. So if you expect to live until 82 or longer, you may consider delaying your benefits.

Recommended: How Can I Retire Early?

The Takeaway

Social Security is an important source of guaranteed income during retirement and can help ensure you can cover recurring expenses like housing payments and utilities. Your monthly payment amount is determined by how much you’ve earned during your working career and the age at which you claim Social Security benefits. You’re eligible to receive your full benefits when you reach full retirement age (FRA). If you file before then, the monthly payment will be reduced. If you file later, your monthly payment can increase, up to a point. Consider your short- and long-term financial needs carefully before deciding when to claim Social Security.

Whether you’re planning to continue working past your FRA or are preparing for retirement, using a money tracker app can help you manage your overall spending and saving. The SoFi app connects all of your accounts in one convenient dashboard. From there, you can see all of your balances, spending breakdowns, and credit score monitoring, plus you can get other valuable financial insights.

Stay up to date on your finances by seeing exactly how your money comes and goes.

FAQ

Can I take Social Security at age 55?

You cannot claim Social Security benefits at age 55. The earliest you can file for benefits is age 62.

What happens to my Social Security if I retire at 55?

If you retire at 55, you will have to wait seven years, until age 62, before you are eligible to claim early Social Security benefits. Retiring early may also affect the size of your benefit if you are leaving work in your top-earning years.

What is the average Social Security benefit at age 62?

The average monthly Social Security retirement benefit in 2023 is about $1,827 for those filing at full retirement age. Filing early at age 62 would reduce that benefit by 30% to $1,278.90.

Photo credit: iStock/svetikd

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When it comes to figuring out when you can retire, there are a number of factors to consider: Social Security, inflation, and health care costs.

Thankfully, there’s retirement calculators for figuring out these costs, which might help you plan for the future. But first, to decide when you can retire, determine at what age you want to retire and then see how that decision affects your finances.

When Can You Get Full Social Security Benefits?

As you consider when to apply for Social Security, you’ll want to understand at what age the government allows people to retire with full Social Security benefits. Not only that, at what age can people start withdrawing from their retirement accounts without facing penalties? For Social Security, the rules are based on your birth year.

The Social Security Administration has a retirement age calculator . For example, people born between 1943 and 1954 could retire with full Social Security benefits at age 66.

Meanwhile, those born in 1955 could retire at age 66 and two months, and those born in 1956 could retire at age 66 and four months. Those born in or after 1960 can retire at age 67 to receive full benefits. This can help with your retirement planning.

Social Security Early Retirement

A recipient will be penalized if they retire before full retirement age. The earlier a person retires, the less they’ll receive in Social Security.

Let’s use Jane Doe as an example and say she was born in 1960, so full retirement age is 67. If she retires at age 66, she’ll receive 93.3% of Social Security benefits; age 65 will get Jane 86.7%. If she retires on her 62nd birthday — the earliest she can receive Social Security — she’ll only receive 70% of earnings.

Here’s a retirement planner table for those born in 1960, which shows how one’s benefits will be reduced with early retirement.

Source: Social Security Administration

Social Security Late Retirement

If a person wants to keep working until after full retirement age, they could earn greater monthly benefits. This is helpful to know when choosing your retirement date.

For example, if the magic retirement number is 66 years but retirement is pushed back to 66 and one month, then Social Security benefits rise to 100.7% per month. So if your monthly benefit was supposed to be $1,000, but you wait until 66 years and one month, then your monthly allotment would increase to $1,007.

If retirement is pushed back to age 70, earnings go up to 132% of monthly benefits. But no need to calculate further: Social Security benefits stop increasing once a person reaches age 70. Here is a SSA table on delayed retirement .

💡 Quick Tip: You can’t just sit on the money you save in an IRA account forever. The government requires withdrawals each year, starting at age 73 (for those born in 1950 or later). These are called required minimum distributions or RMDs.

Other Retirement Income to Consider

In retirement, you may have other income sources that can help you support your lifestyle and pay the bills. These might include:

Part-Time Work

Working after retirement by getting a part-time job, especially if it’s one you enjoy, could help cover your retirement expenses. And as long as you have reached your full retirement age (which is based on your year of birth, as noted above), your Social Security benefits will not be reduced, no matter what your earnings are.

However, if you retire early, you need to earn under an annual limit, which is $21,240 in 2023, to keep your full benefits. If you earn more than that, you’ll lose $1 in Social Security benefits for every $2 you earn over the limit.

Pension

A pension, also sometimes known as a defined benefits plan, from your employer is usually based on how long you worked at your company, how much you earned, and when you stopped working. You’ll need to be fully vested, which typically means working at the company for five years, to collect the entire pension. Check with the HR rep at your company to get the full details about your pension.

A pension generally gives you a set monthly sum for life or a lump sum payment when you retire.

Inheritance

If you inherit money from a relative, these funds could also help you pay for your retirement. And fortunately, receiving an inheritance won’t affect your Social Security benefits, because Social Security is based on money you earn.

Rental Income

Another potential money-earning idea: You could rent out a home you own, or rent out just the upper floors of the house you live in, for some extra income in retirement. Like an inheritance, rental income will not affect your social security benefits.

Major Expenses in Retirement

It’s important to draw up a budget for retirement to help determine how much money you might need. The amount may be higher than you realize. These are some of the major expenses retirees commonly face.

Healthcare

For most people, healthcare costs increase as they get older, as medical problems can become more serious or pervasive. According to Fidelity, the average amount that a couple who are both age 65 will spend on healthcare during their first year of retirement is $12,300.

Housing

Your mortgage, home insurance, and the costs of maintaining your house can be a significant monthly and yearly expense. In fact, Americans aged 65 and older spent $16,880 annually on housing during the years from 2016 to 2020, according to the Bureau of Labor Statistics.

Travel

If you’re planning to take trips in retirement, or even just drive to visit family, transportation costs can quickly add up. From 2016 to 2020, people over age 65 averaged about $7,062 in transportation costs a year.

When Can You Withdraw From Retirement Accounts?

Now let’s look at retirement accounts. Each type of account has different rules about when money can be taken out.

If a Roth IRA account has existed for at least five years, withdrawals from the account are usually okay after age 59 ½ without consequences. Taking out money earlier or withdrawing money from a Roth IRA that’s been open for fewer than five years could result in paying penalties and/or taxes.

There is a little wiggle room. Retirement withdrawal rules do have exceptions for issues like disability or educational expenses, and there is an option to withdraw money early and pay taxes or penalties.

If a person is at least 59 ½ and has a Roth IRA that is less than five years old, taxes will need to be paid upon withdrawal but not penalties. Taxes or penalties might not need to be paid at age 59 ½ and if the Roth IRA has been open for five years or more.

People with a traditional IRA can make withdrawals from ages 59 ½ to 72 without being penalized. The government will charge a 10% penalty on withdrawals before age 59.5, and depending on location, a state penalty tax might also be charged.

People with 401(k)s can typically retire by age 55 and make withdrawals without receiving a penalty. People with either a traditional IRA or 401(k) must start making withdrawals by age 72 or face a hefty penalty.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

The Takeaway

Deciding at what age to retire is a personal choice. However, by planning ahead for some common expenses, and understanding the age at which you can get full Social Security benefits, you can use a retirement calculator formula to figure out how much money you’ll need each year to live on. And you can supplement your Social Security benefits with other forms of income and by making smart decisions about savings and investments.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

How do I calculate my retirement age?

To calculate your full retirement age, which is the age you can receive your full retirement benefits, you can use the Social Security administration’s retirement age calculator . Essentially, if you were born in 1960 or later, your full retirement age is 67. For those born between 1954 and 1959, the full retirement age is between 66 and 67, depending exactly how old they are when they retire (such as age 66 and two months). And for those born between 1943 and 1954, full retirement age is 66.

The earlier you retire before your full retirement age, the less you’ll receive in benefits. Conversely, the longer you keep working, up to age 70, the more you can receive.

Can you legally retire before 55?

Yes, you can legally retire before age 55. However, your Social Security benefits typically won’t kick in until age 62. And even then, because you’ll be tapping into those benefits before your full retirement age of 66 or 67, you’ll get a reduced amount, or just 70%, of your benefits.

There is something called the rule of 55 that allows you to withdraw funds from a 401(k) or 403(b) at age 55 without paying a penalty. That may be something to look into if you’re planning to retire early.

Can you retire after 20 years of work?

In some lines of work, you can retire after 20 years on the job and likely get a pension. This includes those in the military, firefighters, police officers, and certain government employees.

That said, anyone in any industry can retire at any time. However, Social Security benefits don’t typically begin until age 62.

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