Normal Retirement Age (NRA)

The age at which employees are eligible to leave the workforce and start receiving full retirement benefits

What is the Normal Retirement Age (NRA)?

Normal retirement age (NRA) refers to the age at which employees are eligible to leave the workforce and start receiving full retirement benefits. The normal retirement age is sometimes referred to as the full retirement age, which is the age when a person is eligible to receive full benefits.


Normal Retirement Age


The normal retirement age varies across the various retirement plans in the United States. The terms of each plan must be submitted to the Internal Revenue Service for approval. The IRS is responsible for granting tax-qualified status to Social Security beneficiaries, which effectively defers taxes on the earnings until they are paid out.


Understanding the Normal Retirement Age

Once an individual reaches a retirement plan’s normal retirement age, they can start collecting retirement benefits as long as they possess sufficient service credits. The normal retirement age in the United States varies from 65 years to 67 years, depending on the year of birth of an individual.

The earliest age a person can claim Social Security benefits is 62 years, and the individual receives reduced monthly payments. The start of benefits payment can be triggered when an individual reaches the earlier of a plan’s normal retirement age, specific years of service for public servants, police officers, and military officers, or the termination of active service of a participant. When either of these events occurs, a retirement plan must initiate the payment of benefits to qualified participants.

The normal retirement age for private retirement plans in the United States is determined as a combination of age and years of employment. The normal retirement age for an individual to be eligible to receive benefits from Social Security depends on the participant’s date of birth.

During the first years of the Social Security program, the NRA for all participants was 65 years. However, the retirement age has been increasing gradually since 1983, when the US Congress introduced amendments to the Social Security Act.

The impact of the amendment is that not all participants are accorded the same NRA. For example, the retirement age for people born between 1943 and 1954 is 66 years, whereas the retirement age for people born in 1960 or after is 67 years. The change in how normal retirement age is calculated was necessitated by increased life expectancy and health improvements among retirees.


Social Security Benefits Age

The US Government defines retirement age as “early” or “normal” depending on the age when a person chooses to receive Social Security benefits. Early retirement age is defined as any age a person starts collecting benefits before the full retirement age is attained.

The youngest age that a participant can start collecting benefits is 62 years. On the other hand, the full retirement age depends on the date of birth. As of 2019, the retirement age for people born in 1960 or after is 67 years.

If a participant chooses to claim benefits before the full retirement age, they receive lower benefits than the benefits paid to full-age retirees. This is because they will be receiving the benefits sooner and for a longer period. If a person delays claiming Social Security benefits after attaining age 62, the monthly benefits will increase gradually.

If a person claims benefits after attaining the age of 70, the monthly benefit payment will be higher than if they had claimed the benefit at a younger age. Social Security benefits increase until an individual reaches 70 years when the monthly benefits top out.


Work Penalty Before Normal Retirement Age

The Social Security Administration imposes penalties for claims that a person makes before their normal retirement age. The penalties are imposed based on the wages an individual earns until the retirement age is attained.

If a person claims Social Security benefits before the normal retirement age, they are charged a penalty of $1 for every $2 in wages earned over $17,640 (as of 2019) until they reach the normal retirement age. Individuals with wages above $46, lose $1 for every $3 in wages earned.

However, if a person reaches the full retirement age, they can claim all the earnings without affecting their Social Security benefit.


Normal Retirement Age for Survivor Benefits

The normal retirement age for a survivor, such as a widow or a widower, receiving benefits is different from that of regular employees. It may be earlier than the standard retirement age for claiming Social Security benefits.

For example, a survivor can claim Social Security benefits as early as 60 years, whereas the earliest a regular employee can claim Social Security benefits is 62 years. Still, claiming survivor benefits before the full retirement age will result in reduced monthly benefits.


Additional Resources

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

  • 401k Contribution Limits
  • Pension Fund
  • Social Security Tax

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Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!

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