Definition and Examples of the Normal Retirement Age
The normal retirement age is the standard term for the age at which you can retire and receive full retirement income. In the United States, this largely relates to your social security benefits.
Key Points to Understand:
- The normal retirement age is the age at which you can retire and receive full social security benefits.
- It ranges between ages 65 and 67, depending on your birth date.
- Retiring before or after the normal retirement age will reduce or increase your monthly benefits.
- Similar concepts to the normal retirement age also affect your ability to access retirement benefits from a retirement plan or social security.
How Normal Retirement Age Affects Your Benefits
Your normal retirement age determines the amount of benefits available to you, depending on when you apply for social security. If you start receiving social security benefits before you reach your normal retirement age, your benefits will be reduced. If you delay retirement past your normal retirement age, your benefits will increase until you reach age 70.
According to the current system, anyone can begin receiving social security benefits as early as age 62, regardless of their normal retirement age. However, monthly payments are permanently reduced for early retirees based on how far they are from normal retirement age when they begin withdrawing funds. Benefits for those who start at age 62 can be reduced by up to 30%, based on social security guidelines.
Note: Those who wait until after their normal retirement age to claim benefits can receive higher permanent monthly payments. The waiting years turn into “delayed retirement credits,” which can significantly increase income for you and the surviving spouse. You can assess the potential impact of different starting ages by visiting the social security website.
Working Before Normal Retirement Age
You may lose some benefits if you work while receiving social security. This penalty is harsher if you have not yet reached your normal retirement age.
In 2022, you will lose one dollar of benefits for every two dollars in earnings you make over $19,560 a year until the month you reach your normal retirement age. If you wait to retire until the normal retirement age and still work, Uncle Sam will take one dollar for every three dollars in earnings you make above $51,960.
Note: To maximize your social security benefits, look at your retirement age and your spouse’s age. Create a plan that makes the most sense for the long term.
Other Aspects of Normal Retirement Age
The concept of normal retirement age also applies to retirement plans. According to the rules and regulations of the IRS, a retirement plan can pay benefits to someone who is 62 or older, even if they have not been terminated from employment.
For qualified benefit plans, unless you choose otherwise, benefits must begin within 60 days after the end of the last plan year in which you do one of the following:
- You turn 65 (or earlier if the plan has an earlier retirement age)
- You have been active in the plan for ten years
- You terminate service with your employer
Be aware of age 59 and a half, which is the standard age at which you can withdraw funds from certain tax-exempt accounts like 401(k)s and IRAs without incurring penalties. If you have already retired, you can also withdraw funds from a 401(k) plan at age 55 if you stop working for the employer that sponsors your plan. Note that these funds are still subject to taxation.
Applies
The official definition of normal retirement age pertains to when and how you can access different types of retirement accounts. Each person has their own definition. In 2015, the average retirement age was 64 for men and 62 for women. What you consider “normal” may differ. It’s about when you feel ready and what your retirement goals are.
Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we verify facts and keep our content accurate, reliable, and trustworthy.
Social Security Administration. “Normal Retirement Age.”
Social Security Administration. “Early or Late Retirement?”
Social Security Administration. “Receiving Benefits While Working.”
Internal Revenue Service. “Retirement Topics – Important Ages for Retirement Plan Participants.”
Boston College Retirement Research Center. “Average Retirement Age – Update.”
Source: https://www.thebalancemoney.com/normal-retirement-age-2894605
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