Cities and Towns in the United States > Employment > Learn how the U.S. Retirement Plan works


You've reached your sixties and you're thinking about retiring... You begin to picture the things you're going to be able to do now, and to plan how to make your dreams come true, but do you really know your actual retirement date?

Indeed, 62 years old is the legal age to retire, and the age for the full pension rate will depend on the year of your birth.

In this article, we will explain how the U.S. pension system works and we will give you advice on how to take full advantage of your retirement.


The pension system as we know it today was created by Franklin D. Roosevelt with the Social Security Act of 1935. Called the "Old-Age and Survivors Insurance" (OASI), this system provides for the direct deduction of a tax on employees' wages and employers' income.

For a married or divorced couple, you can turn to the Survivor's pension or the Divorced spouse's pension, respectively.

At the same time, it is common for workers to contribute to occupational pension funds to supplement their basic pension. Two alternatives are possible:

  • - Either they choose to let their employer directly invest part of their salary in a private fund called "Defined Benefit Plan",
  • - Or they invest part of their income in a private fund called an "Individual Retirement Account" (IRA).
We explain how the U.S. Retirement Plan works


An OASI contribution is collected at a rate of 12.40% (6.20% for the employer and 6.20% for the employee), under an annual limit of $132,900.

To qualify for a full basic pension, 40 credits must be earned: 1 credit equals 1 quarter. To validate a credit, you must have earned at least $1,360 during the quarter; and it is not possible to validate more than 4 credits per year.

The amount of the basic retirement pension is calculated on the average of the 420 best monthly earnings, which is worth 35 years of work.

A worker can retire at the age of 62. However, the age at which you can obtain a full retirement pension depends on your year of birth. In case of early retirement, the pension will be subject to a decrease of up to 32.5%.

• The Survivor's Pension

When the husband or wife dies, the surviving spouse may receive the pension provided he or she has reached the legal age for a full pension.

Otherwise, the surviving spouse will only receive a percentage of the deceased's pension, depending on his or her age.

You can learn more about the survivor's benefits on this article.

• The Divorced Spouse's Pension

The U.S. retirement system provides that a divorced spouse may receive the deceased person’s pension if the following conditions are met:

  • - The marriage lasted at least 10 years
  • - The ex-spouse has not remarried
  • - The ex-spouse is at least 62 years old
  • - The retirement pension that the ex-spouse receives or should receive is lower than that of the deceased pensioner
  • - The deceased pensioner is eligible for the basic pension plan

Once the ex-spouse has reached the legal age for full pension payment, he or she may request payment of half the deceased's basic pension.

• The Funded Plans

For funded plans, there is no age requirement to take advantage of them. However, penalties may be applied if the person decides to take the funds before the age of 70.

To request your pension from the organization where you have contributed, you will have to make an appointment with them to define the terms of payment.


You will receive your monthly payment directly on your bank account for the OASI. For the private found, you will have to see directly with the organism.