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Personal Finance

Planning to Retire at 65? You May Need to Think Again...

By Brenda Watson Newmann

Age to Receive Full Social Security Benefits

Year of Birth

Full Retirement Age

1937 or earlier
1960 and later

65 and 2 months
65 and 4 months
65 and 6 months
65 and 8 months
65 and 10 months
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months

(Source: SSA web site http://www.ssa.gov)

Millions of people may be miscalculating the age at which they can hope to retire comfortably. Are you one of them?

Consider this: 96% of current working Americans will not be eligible for full Social Security benefits on their 65th birthday. Yet only 16% of workers realize this. This was one result of the 1999 Retirement Confidence Survey released in June by the Employee Benefit Research Institute.

Traditionally, 65 has been the age at which people can retire and receive "full" Social Security benefits. But because of increased life expectancies, the Social Security Administration decided back in 1983 to gradually increase that age. Since this will only begin happening in 2003, for people born in 1938 or later, no one seems to have paid much attention until now.

For older workers, it will be a question of a few months. But for those born in 1960 or later, full retirement age will be 67. (Early retirement with reduced monthly payments will still be possible from age 62 onward, as will late retirement, at 70, with increased monthly payments.)

This matters, because when you plan for retirement you need to know how much income to factor in from Social Security. The check from Uncle Sam is likely not going to be your only source of retirement income, but it will be a portion of it. If you count on receiving full Social Security benefits at age 65, but are really only eligible at 67, your calculations will be out of whack. You may actually have to work a year or two longer than you thought to have your desired income. (Of course, under current laws, you are still eligible to begin withdrawing money from your 401(k) or IRA without penalty at age 59 ½.)

The Social Security Administration (SSA) realizes that the change hasn't been communicated very well to the general public. , click here for a sneak peek at the Social Security statements

That's why they're planning to mail out "Personal Earnings and Benefit Estimate Statements" to everyone over age 25, beginning in October of this year. Look for yours in your mailbox three months before your birthday month. (People with January birthdays will receive the first set.)

This statement will tell you at what age you will be able to retire with full Social Security benefits, and what those benefits should be. It will also list what your monthly Social Security income would be if you retired early (at 62) or late (at 70).

As a test, the SSA began mailing out versions of this statement in 1995, to people 60 and older, and is currently mailing them to people over 45. They have been streamlined based on user feedback, and you'll be receiving a new one even if you already received one of the "test" variety.

If you've already done your calculations for retirement, receiving this statement will help you fine-tune them. If you haven't done them yet, it will be a great starting point!

The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.
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