When you are looking ahead toward your retirement years, you probably view Social Security as a future financial foundation. Without question, most people are going to rely upon Social Security to one extent or another, so you should know all of the facts.
You do not automatically qualify for Social Security when you reach a particular age. To qualify for Social Security, you have to accumulate sufficient retirement credits. You earn these credits while you are paying FICA taxes throughout your working career.
During the 2015 calendar year, you earn one retirement credit for every $1220 that you earn. The maximum annual accrual is four credits, and this is true if you earn $4880, or $4 million. Once you have 40 credits, you will qualify for Social Security benefits when you reach the age of eligibility.
Before we look at the age of eligibility for your full benefit, we should point out the fact that you can accept a reduced benefit when you are as young a 62 years of age. The exact amount of the reduction will vary depending on the year of your birth.
The age of eligibility for your full benefit will also depend upon your birth year. If you were born between 1943 in 1954, the age of full eligibility for Social Security benefits is 66. For reasons unbeknownst to this writer, the age of eligibility then goes up by two months per year for a few years. To explain, if you were born in 1955, you would become eligible two months after your 66th birthday. If you were born in 1956, your age of full eligibility would be four months after you turn 66.
The age of full eligibility goes up by two months each year in this manner, but this two months per year graduation tops out in 1960 when it reaches 70 years of age. People born in 1960 and after become eligible for a full benefit when they reach the age of 70.
We touched upon the fact that you can choose to receive a reduced benefit when you are as young as 62, but you can go in the other direction. If you delay the submission of your application beyond your full eligibility age, you will receive an increased benefit when you do in fact start to draw a monthly direct deposit. The increase would be around eight percent for each year that you delay, but it tops out when you reach the age of 70, so there is no incentive to delay beyond this age.