Early Retirement & Social Security 

If you retire early, whether you take the Social Security benefit or not at 62 (early), consider your options so you don't regret what you've done.

How will your early retirement affect your Social Security benefit?

Your earliest Social Security payment can begin at age 62... unless you take a Social Security Disability Benefit or a Social Security Survivor Benefit, both of which can be paid earlier.

Social Security did increase the "full retirement age" but not the earliest eligibility age... and that's good!

Your Social Security payments will be less if you retire earlier.

That makes sense as you draw the benefit a few years earlier (age 62 to 65-66) so you take a lifetime payment reduction for the opportunity to draw the benefit earlier. Right?

Social Security uses your highest 35 years for the calculation. You could have had more years of earnings or higher earnings, both of which increase the benefit itself. Working a year longer, maybe you earn $50,000, and they drop a year from when you were a teen earning $1000. Makes a huge difference for your lifetime benefit. 

Should you consider working longer, for a larger benefit at 63, 65, 66 (or even later)?

If you have a pension, or investments, maybe you can start Social Security early, as you don't need as much income as someone with only Social Security payments.

If not, if Social Security is your only retirement income, think twice as your later years might be pretty darn tight. The reduction can be a big hit to your lifelong payment, and every little bit helps later when you are on a fixed income, right?

What many don't realize is that Social Security uses 35 years of earnings to calculate your benefit.

Many people believe that Social Security uses your last five years of earnings to determine your benefit - that is wrong.

Pensions might use five year average earnings, Social Security requires thrity-five years (and you get $ 0 earnings for the years you don't have). 

For example, if you worked 25 years, SS will use 25 years of your actual earnings and 10 years of zero earnings for a total of 35 years. For example, a woman who stayed home to raise her kids might have 20 years of earnings (age 35-55 for example) and 15 yrs of $0 earnings...

It hurts.

Early Retirement of the Main Wage Earner

More than 40% of women depend on Social Security for their main (or sole) income. Many more women, compared to men, depend on only Social Security - and it hurts them to live on this lower income.

If the main wage earner (usually the man of the family) chooses to begin retirement benefits early, at age 62, and if he dies first, the spouse does receives his benefit -- but she gets his reduced age 62 benefit for the rest of her life.

If he had remained employed longer, without taking an early retirement and early Social Security payments, she would receive the increased Social Security benefit level for the rest of her life (especially since the surviving spouse is left with one Social Security income, not two).

It may not matter, if the deceased worker also left a pension to the spouse, but if the Social Security is the only income... working even a year or two past age 62, helps with a higher lifetime payment.

Disability Retirement Eligibility and Early Retirement

Another big concern, for me (and other early retirements), is that IF you retire early, under normal circumstances, and IF you never work again... you could be excluded from eligibility for a Social Security Disability benefit, if you were ever in need of one. Read this warning...