Retire early and reduce pension. Let's see how the United States guides individu
The United States, as one of the earlier countries in the world to establish a pension insurance system, has a relatively comprehensive system, but it is also quite "stingy". The earliest design for the retirement age was 65 years old, but later it was also allowed for insured individuals to retire three years earlier (i.e., 62 years old), although the pension would be reduced.
Starting from 1983, the United States enacted legislation to delay the retirement age, increasing the age for receiving full pension benefits from 65 to 67 years old.
However, the calculation of pensions in the United States is very clear. If one retires early, the pension is lower, and the total amount of pension received in a lifetime may not be cost-effective. Therefore, most people will not choose to delay retirement.
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Some may think, why not retire early and continue to work while receiving a pension? In fact, it is possible to work while receiving a pension. However, the tax policy in the United States is very strict. If one's income is high, not only is more personal income tax required, but also if the income exceeds a certain limit, a certain amount of pension will be deducted. For example, in 2023, for those receiving a pension but not yet at the full benefit age for the entire year, if the annual income exceeds $21,240, for every two dollars exceeding this amount, one dollar of pension will be deducted.
The eligibility for receiving a pension in the United States is based on a points system (QC). In 2023, one must contribute $1,640 within a year to earn one point. The requirement is to have 40 points, with a maximum of no more than 4 points accumulated in a year. The contribution rate for U.S. social insurance is 12.4% (6.2% each for the employer and the individual). As long as one's income is not too low or unstable, it is generally possible to receive a pension upon reaching the eligible age.
How is the early retirement pension calculated? The United States is a country with very precise calculations. If you choose to receive your pension one month early, the pension will be reduced by 5/9 of 1%. If you retire three years early, you will receive exactly 20% less.
The U.S. pension system operates on a full pension system. The indexed income from 35 years of pension insurance contributions is calculated based on two turning points, with 90%, 32%, and 15% of the income being calculated, which has a strong income adjustment function. In January 2024, the average pension level in the United States was $1,899.16, and the maximum individual pension was $3,743. If an individual wants to receive a higher pension, they can participate in employer-sponsored pension plans or personal pension plans. Pensions will also be adjusted based on the cost-of-living adjustment index published by the U.S. Social Security Administration, which will increase by 3.2% in 2024.
If one can receive an average pension of $1,900 per month, retiring three years early would only allow for a monthly pension of $1,520, and this impact is for a lifetime.Based on the life expectancy in the United States, the remaining life expectancy for a woman retiring at 62 is 22.78 years, while retiring at 65 still leaves 20.3 years. It is not the case that the later one works, the shorter the remaining life expectancy; the chart circulating online is unfounded.
Receiving $1,520 per month for 22.78 years would amount to a total of $415,500. However, if one receives $1,900 per month for 20.3 years, the total would be $462,800.
This means that not only does retiring later allow for a higher monthly pension, but also by the time one reaches the average life expectancy, the total pension received is greater. This is very attractive for situations where the basic pension level is not high.
The United States collects social security through a payroll tax, with an emphasis on its mandatory and non-contributory nature, and the consequences of tax evasion are severe. Thus, the cost-effectiveness of delaying retirement in the United States is quite high.
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The United States, as one of the earlier countries in the world to establish a pension insurance system, has a relatively comprehensive system, but it is also quite "stingy". The earliest design for the retirement age was 65 years old, but later it was also allowed for insured individuals to retire three years earlier (i.e., 62 years old), although the pension would be reduced.
Starting from 1983, the United States enacted legislation to delay the retirement age, increasing the age for receiving full pension benefits from 65 to 67 years old.
However, the calculation of pensions in the United States is very clear. If one retires early, the pension is lower, and the total amount of pension received in a lifetime may not be cost-effective. Therefore, most people will not choose to delay retirement.
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Some may think, why not retire early and continue to work while receiving a pension? In fact, it is possible to work while receiving a pension. However, the tax policy in the United States is very strict. If one's income is high, not only is more personal income tax required, but also if the income exceeds a certain limit, a certain amount of pension will be deducted. For example, in 2023, for those receiving a pension but not yet at the full benefit age for the entire year, if the annual income exceeds $21,240, for every two dollars exceeding this amount, one dollar of pension will be deducted.
The eligibility for receiving a pension in the United States is based on a points system (QC). In 2023, one must contribute $1,640 within a year to earn one point. The requirement is to have 40 points, with a maximum of no more than 4 points accumulated in a year. The contribution rate for U.S. social insurance is 12.4% (6.2% each for the employer and the individual). As long as one's income is not too low or unstable, it is generally possible to receive a pension upon reaching the eligible age.
How is the early retirement pension calculated? The United States is a country with very precise calculations. If you choose to receive your pension one month early, the pension will be reduced by 5/9 of 1%. If you retire three years early, you will receive exactly 20% less.
The U.S. pension system operates on a full pension system. The indexed income from 35 years of pension insurance contributions is calculated based on two turning points, with 90%, 32%, and 15% of the income being calculated, which has a strong income adjustment function. In January 2024, the average pension level in the United States was $1,899.16, and the maximum individual pension was $3,743. If an individual wants to receive a higher pension, they can participate in employer-sponsored pension plans or personal pension plans. Pensions will also be adjusted based on the cost-of-living adjustment index published by the U.S. Social Security Administration, which will increase by 3.2% in 2024.
If one can receive an average pension of $1,900 per month, retiring three years early would only allow for a monthly pension of $1,520, and this impact is for a lifetime.Based on the life expectancy in the United States, the remaining life expectancy for a woman retiring at 62 is 22.78 years, while retiring at 65 still leaves 20.3 years. It is not the case that the later one works, the shorter the remaining life expectancy; the chart circulating online is unfounded.
Receiving $1,520 per month for 22.78 years would amount to a total of $415,500. However, if one receives $1,900 per month for 20.3 years, the total would be $462,800.
This means that not only does retiring later allow for a higher monthly pension, but also by the time one reaches the average life expectancy, the total pension received is greater. This is very attractive for situations where the basic pension level is not high.
The United States collects social security through a payroll tax, with an emphasis on its mandatory and non-contributory nature, and the consequences of tax evasion are severe. Thus, the cost-effectiveness of delaying retirement in the United States is quite high.
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