What percentage of retirement benefit do you lose if you retire at 62 instead of 67?
Fears in the 1980s that Social Security would become insolvent prompted changes to the retirements benefits program. Retiring before age 67 can be costly.
Americans that have contributed at least ten years’ worth of payroll taxes to the Social Security program can claim Old-Age benefits. This social safety net established in the 1930s has helped alleviate poverty among the elderly. When it was set up as much as half the older population was penniless at the height of Great Depression.
The Social Security Act created unemployment benefits along with retirement benefits for Americans. In the beginning, both men and women could claim benefits at age 65. Later, the age was lowered to 62, first for women in 1956 and then men in 1961, but in order to receive the full amount based on contributions potential recipients still had to wait until they turned 65.
However, economic conditions forced changes to the system which resulted in a postponement of when one could claim full benefits, which gradually increases for those born in 1955 and later, raising the age from 65 to 67 for those born after 1960. While you can still claim Old-Age benefits at 62 years of age, there is a penalty that could reduce monthly payments by up to nearly a third.
What percentage of retirement benefit do you lose if you retire at 62 instead of 67?
The earliest a person can retire is age 62, plus one month as you have to be 62 throughout the first month of retirement. However, as mentioned, workers are penalized for not waiting until they reach full retirement age. But it should be known that they are rewarded for claiming benefits even later than that threshold.
In order to receive the maximum monthly retirement benefit amount from the Social Security Administration, a worker needs to wait until they are 70 to begin receiving benefits.
However, if you begin receiving monthly Social Security payments the first month you are able to, you will suffer a permanent 30 percent reduction in the amount of your monthly checks.
Why was the Social Security retirement age for full benefits changed?
Fears in the 1980s that Social Security would become insolvent within a matter of years prompted changes to the retirements benefits program. One of those changes was extending the age at which Americans could start to collect Social Security benefits at the full amount based on what they had contributed.
There have been several changes to the Social Security program since its inception, expansion of those that could claim benefits like survivors of breadwinners and later those that became disable carrying out their at-work duties. However, the bulk of claims to the program come from those that have reached an age where they can retire.
Legislation in the 1970s was passed to automatically adjust benefits for all were tied to inflation, known as the cost-of-living adjustment or COLA. However, that also happened to be during an extended period rampant inflation due to several factors. This put great strain on the Social Security program as it was, necessitating change to prevent insolvency of the Trust Funds that support the timely payments from the agency.
In 1983, legislation was passed to strengthen the financing of the Social Security program and guarantee the solvency of the trust funds that were facing an imminent cash crunch. As part of the changes, a gradual increase in the full retirement age was implemented going from 65 to 67.