What Is Normal Retirement Age?

Definition & Examples of Normal Retirement Ages

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Normal retirement age is a standard term for the age at which you can retire and receive your full retirement income. In the U.S., this primarily relates to your Social Security benefits.

Some people strike it rich enough to give up working before age 50, while others hang onto their working lives well into their 80s. Regardless of your unique situation, though, the Social Security Administration defines your available benefits by your age.

What Is Normal Retirement Age?

In most cases, if you have been working, you have been paying a portion of your income into Social Security in order to have a guaranteed income when you are no longer able to work. In order to get that full income, however, you cannot start taking your benefits until your normal retirement age (NRA).

The Social Security Administration sets your NRA based on when you were born. 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, to those born in 1960 or later who have to wait until they turn 67.

  • Acronym: NRA
  • Alternate Name: Full retirement age

The Social Security Administration lists normal retirement ages by date of birth on its website.

How Normal Retirement Age Affects Your Benefits

Your normal retirement age determines how much of your available benefits you can draw depending on when you apply for Social Security. If you begin taking Social Security benefits before you reach normal retirement age, your benefits will be reduced. If you delay your retirement past your normal retirement age, your benefits will increase until you reach age 70.

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

You can also lose some of your benefits if you continue working while receiving Social Security benefits, and this penalty is steeper if you have not reached your normal retirement age.

For 2021, you will lose $1 in benefits for every $2 in wages you earn over $18,960 per year until the month you reach the normal retirement age. If you wait to take benefits until your normal retirement age but continue working, the government will take $1 for every $3 in wages earned in excess of $50,520.

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.

For qualified benefit plans, unless you elect otherwise, benefits must begin within 60 days after the end of the last plan year in which you do one of the following:

  1. Turn 65 (or earlier if the plan has an earlier retirement age)
  2. Participate in the plan for 10 years
  3. Terminate your service with your employer

Another important age to pay attention to is 59 1/2, which is the standard age at which you can take penalty-free withdrawals from tax-advantaged accounts such as 401(k)s and IRAs. If you are already retired, you can also take penalty-free withdrawals from a 401(k) plan at age 55 if you stopped working for the employer that holds your plan. Note that these withdrawals are still considered taxable income.

Ultimately, the formal definition of "normal" retirement age really applies to when and how you can access various types of retirement accounts. Everyone has their own definition, though. In 2015, the average retirement age was 64 for men and 62 for women. Your definition of normal may vary, and it comes down to when you are ready and what your retirement goals are.

Key Takeaways

  • Normal retirement age is the age at which you can retire and draw full Social Security benefits.
  • It ranges between age 65 and 67, depending on when you were born.
  • Retiring before or after your normal retirement age will reduce or increase your monthly benefit, respectively.
  • Similar concepts to normal retirement age also affect your ability to take benefits from a pension or qualified retirement plan.