New York, NY – Reaching age 65 is a significant milestone in the United States, not only because it is the age of eligibility for Medicare but also because it marks an opportune time for many to consider retirement. Although beginning to collect Social Security benefits at age 65 will not provide the full amount, the penalty is less significant compared to claiming benefits at 62.
The process of calculating Social Security benefits at age 65 is relatively complex and involves three major steps. The Social Security Administration (SSA) first determines the individual’s average indexed monthly earnings (AIME), which includes up to 35 years of the worker’s highest earnings. The second step involves using the AIME to calculate the worker’s primary insurance amount (PIA), which is the most complex part of the process. Finally, the SSA determines the individual’s monthly retirement benefits using the PIA.
For individuals who will turn 65 in 2024, the full retirement age (FRA) will be 66 and 10 months. If they turn 65 after 2024, their FRA will be 67. As a result, the monthly retirement benefit will be reduced for each month before the FRA. Someone turning 65 in 2024 and beginning to collect Social Security retirement benefits can expect to receive 87.78% of the PIA, while someone turning 65 after 2024 will receive 86.67% of the PIA.
When it comes to the average Social Security retirement benefit at age 65, the exact amount varies based on individual earnings history. However, based on the latest data from the SSA, the average Social Security retirement benefit at age 65 is $1,504.98. This average differs for men and women due to earnings discrepancies.
It’s important to note that there have been cost-of-living adjustments (COLAs) applied to Social Security benefits since December 2022, resulting in an increase of 8.7% in 2023 and a 3.2% increase in the following year. This may have affected the average earnings used to calculate benefits. Additionally, waiting to collect retirement benefits until age 67 or 70 can result in a higher monthly benefit.
Ultimately, reaching age 65 is a significant milestone, but waiting to collect retirement benefits can pay off handsomely. Holding off until age 67 or 70 can result in a higher monthly benefit.