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NORMAL AGE FOR RETIREMENT CREEPING UP

Question - I'm 58 and plan to retire when I'm eligible for full Social Security benefits. Will I be affected by the higher age requirements scheduled to kick in?

Answer - Yes, but not by much. You'll have to work two additional months after you turn 65 to collect full benefits.The "normal retirement age" is set to increase gradually from 65 to 67. For those born in 1938 through 1942, two months are added for each year between 1937 and the year of birth. The normal retirement age stays fixed at 66 for those born between 1943 and 1954.

For those born in 1955 and beyond, it gradually rises until it reaches age 67 for those born in 1960 and later.

Workers will still be eligible for reduced benefits at 62, but the amount paid could be as much as 30 percent less than the full benefit.

Question - How do I know whether I qualify for a full retirement benefit? How is it calculated?

Answer - In general, you're "covered" by Social Security when you work in a job where you pay Social Security taxes. You're "fully insured" when you've met earnings requirements in 40 quarters of coverage.

You can get a free Earnings and Benefit Estimate Statement from the Social Security Administration by calling 1-800-772-1213.

Once you turn 62, your retirement benefit is calculated as follows: From 1951 on, your annual earnings up to the maximum amount credited by the Social Security Administration are adjusted for inflation to make past earnings comparable to earnings today.

Earnings are adjusted in that way each year until age 60, when actual earnings are used. The 35 years with the highest "average indexed monthly earnings," or AIME, are then used to figure your benefit.

At this point, a three-part formula is used to compute the benefit. For someone who turns 62 in 1996, the first $437 of monthly earnings are multiplied by 90 percent, the next $2,198 by 32 percent, and any remaining amount of the AIME by 15 percent. Results are added and rounded to get the full retirement benefit rate.