How this could affect early retirement
The ideal timing for retirement can feel more confusing than ever in today’s economic climate. However, one way to fine-tune the decision is to look at all the financial facts. This often includes projected social security benefits. By understanding the full scope of social security benefits and how they work, you can make a more informed decision on whether to retire early, at retirement age, or later.
The Basics of Social Security Benefits
It is stated on the Social Security Benefits website, “Workers planning for their retirement should be aware that retirement benefits depend on age at retirement.” What does that mean? At the most basic level it means:
- Retiring early may result in a reduction of benefits—this can be up to a 30% reduction
- Retiring at normal retirement age may result in larger benefits
- Delaying benefits until after normal retirement age may allow you to receive your largest benefit
Broken down further, you’ll find as stated on the Social Security Administration website: “With early retirement, a benefit is reduced 5/9 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.”
For a later retirement, for each year of delayed retirement, depending on your year of birth, you’ll receive a 3% to 8% credit annually.
Crunching the numbers can feel overwhelming, Visit the Social Security Benefits webpage for free financial calculators.
Can You Work While Receiving Social Security Benefits?
The short answer is yes, you can work and still receive social security benefits. However, if you are younger than retirement age, you may have a reduced benefit if you make more than the yearly earnings limit. For those under the normal retirement age, the yearly earnings limit for 2017 is $16,920. It’s also helpful to note that in the months preceding the time you’ll reach normal retirement age, the limit will become $44,880. As soon as you reach the month of your full retirement age, you can have your benefits with no limits on your earnings.
This means the only time that your social security benefits are affected if you work is before you reach retirement age. For help finding your retirement age, you can visit the retirement planning page.
How Much Does It Affect You to Retire Early?
As stated above, it can affect you to retire early, and it is a reduction in benefits. Early retirement age is 62. While you can still receive social security benefits at 62, the reduction in benefits can be up to 30%, and many experts warn those considering early retirement to do a thorough analysis before making the decision.
Some common thoughts are:
- If you retire at 62, find other funds and delay social security until a later age
- Note that your pension may go down when your social security becomes available
- If you want to maximize the survivor’s benefits, delay the start of benefits until age 70, if possible
No one can tell you what is right for your retirement, including the timing and when to take social security. The best course of action is to sit down and talk with a professional, or if you have the skills, do a thorough analysis yourself on what avenue would best suit you.
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