Many people set a retirement date based on the age at which they become eligible to start receiving Social Security. Of course, there are those who can indeed retire as soon as they become eligible for Social Security benefits, but not everyone is in this category.
Under currently existing laws, you can start receiving your benefit when you are as young as 62. If you do this, you must be willing to accept a reduced benefit. Your benefit would be 30% less than it would be if you waited until you reached full retirement age.
And then there is the matter of working while receiving a Social Security benefit. If you receive an early benefit, you can only earn $14,640 (this was the 2012 figure) in a year before you start being penalized. The Social Security Administration would deduct one dollar from your benefit for every two dollars that you earn above this figure.
Full retirement age at the present time is 66 for people born in 1954 or earlier. Those born in 1955 become fully eligible when they are 66 years and two months old. The age of eligibility goes up by two months year-by-year in this manner until 1960 when it maxes out at 67.
The amount you receive is calculated based on the 35 years during your working career that you earned the most amount of money.
So, if you were to delay your application beyond your full retirement age, you would be increasing your benefit if you were making more money than you did earlier in your career.
Plus, you accrue delayed retirement credits when you don’t apply for your benefit as soon as you are eligible. These can be accumulated until you are 70 years of age. Your benefit will rise by about 8% per year for each year that you choose to delay applying for Social Security if you were born in 1943 or later.