Retirement is a milestone that many people look forward to, as it marks the end of their working years and the beginning of their golden years. But for many, retirement also brings up concerns about finances and how much income they will have in their later years. This is where understanding your full retirement age and how much you can make during this time becomes crucial.
Understanding Full Retirement Age
Full retirement age (FRA) is when you are eligible to receive full retirement benefits from the Social Security Administration (SSA). For many years, the full retirement age was 65 for those born before 1937. However, as life expectancy has increased, the Social Security Act was amended and the full retirement age was gradually raised. Currently, the full retirement age for those born between 1943 and 1954 is 66, and it will increase to 67 for those born in 1960 or later.
It’s important to note that you can choose to retire earlier or later than your full retirement age. If you choose to retire early, your monthly benefit amount will be reduced, while retiring after your FRA will result in an increased benefit amount.
How Much Can You Make at Full Retirement Age
The amount you can make at full retirement age depends on your personal situation and whether you are receiving Social Security retirement benefits.
For those who are receiving Social Security retirement benefits, their income will be subject to an earnings limit if they choose to work before their full retirement age. For 2020, the earnings limit is $18,240. This means that for every $2 earned above the limit, $1 will be withheld from their benefits. This limit only applies to income earned before reaching your full retirement age. Once you reach your full retirement age, there is no limit on how much you can earn while receiving benefits.
On the other hand, if you are not yet receiving Social Security retirement benefits and have reached your full retirement age, you can earn as much as you want without it affecting your benefits.
It’s also worth noting that the money you earn at full retirement age may affect your taxes, so it’s important to consult with a financial advisor or tax professional for a detailed understanding of your specific situation.
The Benefits of Working at Full Retirement Age
While many people choose to retire fully at their FRA, there are also many benefits to working during this time. Here are a few advantages of working at full retirement age:
1. Increased Social Security Benefits
If you continue working until your full retirement age, your Social Security benefits will likely increase. This is because of the SSA’s “benefit formula,” which calculates your benefits based on your 35 highest-earning years. If you continue to work, you may replace some of your lower-earning years with higher-earning ones, resulting in a higher benefit amount.
2. Additional Savings
Working at full retirement age also allows you to continue contributing to retirement savings accounts, such as a 401(k) or IRA. This can help supplement your Social Security benefits and provide additional income in your later years.
3. Social Interaction
Retirement can sometimes lead to a decrease in social interaction, which can negatively impact mental health. By working at full retirement age, you can continue to interact with colleagues and maintain your social connections.
Frequently Asked Questions About Full Retirement Age
Q: Can I work while receiving Social Security retirement benefits?
A: If you have reached your full retirement age, you can work and earn as much as you want without it affecting your benefits. If you are below full retirement age, there is an earnings limit that may affect your benefits.
Q: Can I retire before my full retirement age?
A: Yes, you can choose to retire before your full retirement age. However, your monthly benefits will be reduced.
Q: How is full retirement age determined?
A: Full retirement age is determined by the SSA and is based on your birth year. It ranges from 66 to 67, depending on when you were born.
In Conclusion
Full retirement age is an important factor to consider when planning for your retirement. It determines how much you can make from working and receiving Social Security benefits, and also has an impact on your taxes. Now that you have a better understanding of full retirement age and its implications, you can make informed decisions about your retirement plans. Remember to consult with a financial advisor for personalized guidance on how to make the most out of your golden years.
