What Is Normal Retirement Age?

Your Retirement Age Will Determine Your Benefit Amount

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These days, even a normal retirement age is difficult to define. Some people strike it rich enough to give up working before age 50 while others hang onto their working lives well into their 80s. If you have a private pension plan, normal retirement age is frequently calculated as a combination of age and years of employment. But for the nation's largest and most ubiquitous pension plan, Social Security, rights to full benefits are determined largely by age. In other words, you must be at least this old to be normal.

But that’s the tricky part as there is not one set age. Social Security's normal retirement age is more like a spectrum, which varies by date of birth. It can range from people born in 1937 or before who have a full retirement age of 65, to people born between Jan. 2, 1943, and Jan. 1, 1955, who get full benefits at age 66 1/2, to those born in 1960 or later who have to wait until they turn 67. The Social Security Administration lists normal retirement ages by date of birth on their website.

Normal Retirement Age and Social Security

Your normal retirement age is important when applying for Social Security for a couple of reasons: Before you reach normal retirement age, your benefits will be reduced. After you reach normal retirement age, your benefits will increase until age 70 when your monthly benefit amount stops increasing. Your age helps you determine the amount of your monthly benefit payments, and lets you know whether you will be penalized for earning wages while you draw benefits.

You can get a quick estimate of what your monthly benefits might be, based on your age and current income, through the Social Security Administration’s normal retirement age calculator

Monthly Benefits and Normal Retirement Age

As the system stands, anyone can start drawing Social Security benefits at age 62 or later regardless of their normal retirement age. But monthly payments are permanently reduced for early retirees depending on how far they are from their normal retirement age when they start collecting. Those who start at age 62 could see a reduction in benefits by as much as 30%, according to the Social Security Administration.

Those who wait until after their normal retirement age to draw benefits can qualify for permanently higher monthly payments. The years you wait translate into something called delayed retirement credits, which can really boost income for you as well as a surviving spouse. You can calculate the potential impacts whether you start collecting early or late on the Social Security website.

Work Penalty Before Normal Retirement Age

If you claim Social Security benefits after normal retirement age, the money is all yours. But if you claim before normal retirement age, you may pay a penalty based on wages you earn until normal retirement age is reached. For 2020, you will lose $1 in benefits for every $2 in wages you earn over $18,240 per year until the month you reach the normal retirement age. Recipients could lose $1 for every $3 in wages earned in excess of $48,600 in 2020.

To make the most of your Social Security benefits, pay attention to your retirement age and that of your spouse, and create a strategy that makes the most sense for the long term.

Other Aspects of the Normal Retirement Age

The concept of normal retirement age also applies to pension plans. According to IRS rules and regulations, a pension plan may pay benefits to a participant age 62 or older even if the participant has not separated from employment. The rules regarding a plan’s youngest permissible normal retirement age have a safe harbor of age 62. 

Defined benefit plans often calculate retirement benefits based on annuities beginning at age 65.

Unless a participant elects otherwise, benefits under a qualified plan must begin within 60 days after the close of the latest plan year in which the participant: 

  1. Turns 65 (or the plan’s normal retirement age, if earlier)
  2. Completes 10 years of plan participation; or
  3. Terminates service with the employer

Another important age to pay attention to is 59 1/2, which is the age you can take penalty-free withdrawals from tax-advantaged accounts such as 401ks and IRAs. If you are already retired you can also take penalty-free withdrawals from a 401k plan at age 55 due to separation of service. Note that these withdrawals are still considered taxable income.

As you can probably see, the definition of "normal" retirement age really applies to when and how you can access various types of retirement accounts. In 2015, the average retirement age was 64 for men and 62 for women. But your definition of normal may vary and it really all comes down to when you are ready.

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Article Sources

  1. Social Security Administration. "Normal Retirement Age." Accessed July 7, 2020.

  2. Social Security Administration. "Retirement Benefits: Starting Your Retirement Benefits Early." Accessed July 7, 2020.

  3. Social Security Administration. "Benefits Planner: Retirement - Getting Benefits While Working." Accessed July 7, 2020.

  4. IRS. "Retirement Topics - Significant Ages for Retirement Plan Participants." Accessed July 7, 2020.

  5. Center for Retirement Research at Boston College. "The Average Retirement Age - An Update." Accessed July 7, 2020.