Making the decision to retire before reaching full Social Security retirement age is a valid option for many workers in the United States. However, it is important to understand the implications of this decision, as early retirement can affect the amount of your monthly payments. While you can start getting Social Security benefits as early as age 62, choosing to do so before age 66 or 67 leads to a significant reduction in payments.
Understanding how early retirement works and how it impacts the total amount you’ll get for life is crucial. That’s why we need to address the most important aspects of this process and how to calculate what you could get if you decide to retire early.
How does Social Security early retirement work?
Social Security allows workers to start their retirement early at age 62, but you should be aware that this decision leads to a permanent reduction in your monthly payments. This reduction is a percentage based on the number of years remaining until you reach full retirement age (which varies between 66 and 67, depending on your year of birth). If you decide to retire at age 62, your monthly payment can be up to 30% lower than if you wait until full retirement age.
This is how to apply for early retirement from Social Security:
- Retirement at age 62: 25-30% less than full retirement.
- Retirement at age 63: 20-25% less.
- Retirement at age 64: 12-20% less.
- Retirement at age 65: 6-12% less.
It is important to check with the Social Security Administration (SSA) or use their online benefit calculator to see how this reduction would apply to your specific case. Remember that these figures are guidelines and we can’t know what our final check will be until we start collecting in retirement.
Also, when you add to that the fact that waiting until age 70 can net you a check of $4,873 in this year 2024 or $5,180 in 2025 after adding the COLA, we can conclude that it’s a good idea to wait a little earlier before retiring.
Long-Term Consequences of Social Security Early Retirement
Although you may be able to access benefits sooner, early retirement has a long-term financial impact. As the monthly amount you will get is reduced, the total amount you will be able to receive over your lifetime is also reduced, especially if you live many years after you retire. It is crucial that you do a financial analysis of your situation before making this decision.
Moreover, we have to keep this in mind:
- Working while receiving benefits: If you decide to continue working while getting early payments, your earnings could reduce your Social Security benefits , especially if you have not yet reached full retirement age.
- Health benefits: In some cases, if you retire early, you may lose the option to get certain additional health-related benefits that would be available through Medicare.
Any help we can get is good, but we must keep in mind that applying for Social Security early has its consequences, but not only financial. That is why we must keep everything in mind before enjoying our retirement.