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Early Retirement Social Security Benefits

Bridge To Medicare At Age 65

Want to Retire Early? Don’t Make this BIG Social Security Mistake

Remember that while you are eligible for reduced Social Security benefits at 62, you won’t be eligible for Medicare until age 65, so you will probably have to pay for private health insurance in the meantime. That can eat up a large chunk of your Social Security payments.

Read Viewpoints on Fidelity.com: Your bridge to Medicare

You Want To Make A Career Change

If you’re completely burned out career-wise by the time you turn 62, that alone could drive you into early retirement. And that could mean shorting yourself on your nest egg and having to pull from your savings earlier in life, thereby running the risk of depleting your cash reserves in your lifetime.

But if a career change is what it takes to keep you in the workforce for many more years, then it pays to go for one. And if that means taking a pay cut, then it makes sense to claim Social Security and use your benefits to supplement your income while you gain experience and work your way up in a new, more rewarding field.

Your Social Security Benefits Are Likely An Important Part Of Your Retirement Income Plan So Choose Your Timing Wisely

  • Delaying when you receive your benefits will lead to higher monthly payments.

  • Working while receiving early benefits is generally not your best option.

  • Cash flow needs, your spouses plans, and your financial goals are all important factors to consider.

Roger Young, CFP®

After decades of paying into Social Security, Americans in their 60s must decide when to start receiving their benefits. According to an analysis of Social Security Administration data, between 50% and 60% of workers elect to receive their Social Security benefits before their full retirement age .1 While that may be the right move for some, many savers will benefit from delaying payments until their FRA, or even delaying until age 70, to maximize the size of their monthly benefit.

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What Is The Early Retirement Penalty

If you claim Social Security retirement benefits before your full retirement age, which is 67 for those born in 1960 or later, the SSA will permanently lower your benefits. Social Security does this to try to make the amount you receive over your life expectancy equal whether you claim at age 62 and get a reduced amount, 67 and get the standard amount, or 70 and get an increased amount.

The SSA will reduce your benefits by 5/9 of one percent per month for each month you receive benefits before your normal retirement age. This reduction is roughly equal to roughly .556% per month. For example, if you start claiming benefits 27 months before you turn 67, your monthly benefit will be reduced by 15% . The reduction is permanent.

If you claim retirement benefits more than 36 months early, the per-month reduction is not quite as harsh. The SSA has a different calculation for the months over 36. For example, if you start claiming benefits 60 months before you turn 67, your benefit will be reduced by 30% . The earliest you can claim retirement benefits is 60 months before your retirement age.

To learn more about collecting Social Security benefits, you may want to consider reading Nolo’s book, Social Security, Medicare, & Government Pensions: Get the Most Out of Your Retirement & Medical Benefits.

What If I Continue Working In My 60s

Social Security Age Chart: When to Start Drawing Bene...

Many people whose health allows them to continue working in their 60s and beyond find that staying in the workforce keeps them young and gives them a sense of purpose. If this sounds like something youâd like to do, know that working after claiming early benefits may affect the amount you receive from Social Security. Why? Because the Social Security Administration wants to spread out your earnings so you donât outlive them. If you claim Social Security benefits early and then continue working, youâll be subject to whatâs called the Retirement Earnings Test.

If youâre between age 62 and your full retirement age, and youâre claiming benefits, you need to know about the Earnings Test Exempt Amount, a threshold that changes yearly. For 2022, the Retirement Earnings Test Exempt Amount is $19,560/year . If youâre in this age group and claiming benefits, then every $2 you make above the Exempt Amount will reduce by $1 the Social Security benefits you’ll receive.

Contrary to popular belief, this money doesnât disappear. It gets credited back to you – with interest – in the form of higher future benefits. You may hear people grumbling about the Social Security âEarnings Taxâ, but itâs not really a tax. Itâs a deferment of your benefits designed to keep you from spending too much too soon. And after you hit your full retirement age, you can work to your heartâs content without any reduction in your benefits.

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Planning For Retirement Alone

One financial decision retirees, young and old alike, rarely regret is working with a trusted and qualified financial professional for their retirement needs.

Even if you think you have everything all planned out, working with a financial professional can still be incredibly reassuring for retirees. Financial advisors and planners can help you build, monitor and manage your financial plans and look out for your best interests. They understand your goals and will be there each step of the way for the transition into retirement. Having this kind of guidance gives retirees peace of mind. Their finances are in good hands, and they get the chance to enjoy the next chapter of their retirement lifestyle.

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Early Retirement: Social Security Benefits Didnt Factor For This Subset Of Pandemic Retirees

The pandemic brought financial hardship for millions of Americans while also revealing a subsect of the population that does not rely heavily on Social Security benefits.

Find: American Workers Get Less Social Security and Less Paid Time Off Than Workers in Other Countries

The Seattle Times reports that many people chose to retire early during the pandemic but surprisingly decided to put off taking Social Security benefits.

The number of workers applying for Social Security benefits in the 12 months ended September fell 5% from the same period a year earlier, according to the Social Security Administration the biggest drop in almost two decades. During the same period though, the number of workers who retired ages 65-69 actually increased 5%, the Washington Post reports. While it is unclear how many of those who retired early delayed social security benefits, the sudden drop-off shows an unusual trend for retirees.

During the pandemic, Americas retiree population grew by about 3 million this is double what would have been expected given pre-pandemic trends, the Seattle Times adds. Concerns surrounding contracting the virus and the lack of childcare likely made it easy for millions of Americans to choose to opt-in to early retirement rather than take on the added risks of continuing to work.

This means that this years retirees who chose to retire but delay benefits have enough financial means to not need federal benefits for support.

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If You Were Born Between 1960 Your Full Retirement Age Is 67

You can start your Social Security retirement benefits as early as age 62, but the benefit amount you receive will be less than your full retirement benefit amount.

The chart below provides examples of the percentage of your full retirement benefit amount you and your spouse would receive from age 62 up to your full retirement age.

Is There A Maximum Benefit

Social Security Spousal Benefit Early Retirement 62

Yes, there is a limit to how much you can receive in Social Security benefits. The maximum Social Security benefit changes each year. For 2022, itâs $4,194/month for those who retire at age 70 . Multiply that by 12 to get $50,328 in maximum annual benefits. If that’s less than your anticipated annual expenses, youâll need to have additional income from your own savings to supplement it.

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You Expect Your Investments To Grow Faster Than The Increased Benefit

If youre the next Warren Buffet, its possible you could do better taking Social Security early and investing the money than you could by waiting to take a larger benefit later. When weighing the best decision, consider the inflation rate, the rate your benefits increase and how much you can expect to earn in your portfolio. Given that benefits increase by 8% per year for each year you wait after full retirement age, however, its hard to outperform that rate of increase in the market. These safe investments do have high returns.

Pension Benefits Can Lower Earnings

Some pension plans offer a larger initial monthly benefit when you take early retirement the pension benefit then automatically goes down when you become eligible to draw on Social Security. If you are not aware of this, you may think you will get your full pension benefit plus Social Security.

Not all pensions work this way, so attend all classes or seminars offered by your employer to make sure you fully understand your pension and health benefits prior to taking early retirement. Ask plenty of questions, and set up a one-on-one appointment with a benefits advisor or HR person if you can.

If you worked in education or for the state or a government entity, be aware when you do begin your Social Security benefits that they may be less than what your statement shows, due to something called the “windfall elimination provision” or the “government pension offset.”

For example, suppose your neighbor Lois worked as a teacher for 43 years, and in retirement she expects to get her pension plus $1,300 per month in Social Security. She will be shocked when she learns that her Social Security will be less than $300 per month due to the government pension offset that applies if she gets a pension for years of work where she was not covered under the Social Security system.

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Social Security Reporting Information And Full Retirement Age Table For Homestead Exemption Applicants

This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue until amended. A guidance document does not include internal procedural documents that only affect the internal operations of DOR and does not impose additional requirements or penalties on regulated parties or include confidential information or rules and regulations made in accordance with the Administrative Procedure Act. If you believe that this guidance document imposes additional requirements or penalties on regulated parties, you may request a review of the document.

This guidance document may change with updated information or added examples. DOR recommends you do not print this document. Instead, at revenue.nebraska.gov to get updates on your topics of interest.

Per Neb. Rev. Stat. § 77-3504 of the homestead exemption laws, household income must include social security retirement and Tier I railroad retirement benefits.

Social Security Conversion from disability benefits to retirement benefits occurs at FULL RETIREMENT AGE per the Social Security Administration.

Benefit Reduction For Early Retirement

Changes Ahead For Social Security?

We sometimes call a retired worker the primary beneficiary, because it is upon his/her primary insurance amount that all dependent and survivor benefits are based. If the primary begins to receive benefits at his/her normal retirement age, the primary will receive 100 percent of the primary insurance amount. If the spouse of a primary begins to receive benefits at his/her normal retirement age, the spouse will receive 50 percent of the primary’s primary insurance amount.

The table below illustrates the effect of early retirement, for both a retired worker and his/her spouse. For our illustration, we have used a $1,000 primary insurance amount. With this primary insurance amount and both primary and spouse retiring at their respective normal retirement ages, the primary would receive $1,000 per month and his/her spouse would receive $500 per month. The table shows that retirement at age 62 results in substantial reductions in monthly benefits. Please note that relatively few people can begin receiving a benefit at exact age 62 because a person must be 62 throughout the first month of retirement. Thus most early retirees begin at age 62 and 1 month.

Primary and spousal benefits at age 62

Year of

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Not Knowing Or Understanding The Numbers

One of the most difficult transitions when entering retirement is shifting from a salary or sustainable income to living on a fixed income. Success in making this shift, said Stacy Livingstone-Hoyte, AFC and financial guide at Your Money Line, requires thoroughly examining your income, expenses and any other financial resources.

Rather than assume they will be okay in retirement, Livingstone-Hoyte said retirees should examine their replacement income sources and the duration of these sources. Additionally, take into consideration whether these income sources are adjusted for inflation and to account for economic shifts.

When possible, Livingstone-Hoyte recommends retirees simulate their retirement lifestyle, especially those who want to retire early.

Early retirees must simulate the retirement lifestyle they envision with the sources of income they will have. This should be an active and ongoing experiment for a few months at least to determine real retirement readiness, said Livingstone-Hoyte.

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How Do I Know When I’m Eligible For Social Security

To be eligible for Social Security retirement benefits you must generally be at least age 62 and have earned at least 40 Social Security credits. Typically that means you’ve worked and paid into the system for at least 10 years. Spouses can also be eligible for benefits based on their spouse’s work record.

Also Check: Taxes On Social Security Benefits 2021

Reasons You Should Claim Social Security Early

Learn why Social Security at 62 might not be a bad idea. Social Security 101

Your retirement planning likely includes getting income from the Social Security Administration, but when you start collecting Social Security benefits can have a big impact on your planning. The earliest you can collect is age 62, but youll get more money if you delay your benefits past your initial Social Security eligibility. If you wait until after your full retirement age to start collecting Social Security you can earn delayed retirement credits, which will increase your benefits even more.

Learn: 7 Surprisingly Easy Ways To Reach Your Retirement Goals

You might think that waiting for bigger benefits is better, but thats not always the case. There is no definitive answer to when you should collect Social Security benefits, and taking them as soon as you hit the early retirement age of 62 might be the best financial move. Learn why you might want to start taking Social Security at 62.

You’re Worried You Won’t Live A Long Life

ð´Can I Apply For Social Security Retirement Benefits In Advance of Age 62

Social Security is actually supposed to pay you the same lifetime total regardless of when you initially claim benefits. Think about it this way — filing at age 62 will mean getting less money each month, but enjoying more months of benefits. Waiting to file will mean getting more money each month, but over a shorter period of time.

All told, things should even out if you live an average lifespan. But if you have reason to believe you’ll pass away at a relatively early age, then it pays to claim Social Security at 62. Doing so could mean getting a higher lifetime benefit from the program.

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You Can Receive Benefits Before Your Full Retirement Age

You can start receiving your Social Security retirement benefits as early as age 62, but the benefit amount will be lower than your full retirement benefit amount.

If you start receiving your benefits before your full retirement age, we will reduce your benefits based on the number of months you receive benefits before you reach your full retirement age.

If you wait until age 70 to start your benefits, your benefit amount will be higher because you will receive delayed retirement credits for each month you delay filing for benefits. There is no additional benefit increase after you reach age 70, even if you continue to delay starting benefits.

What If I Take Benefits Early

If you choose to take your own Social Security benefit before your full retirement age, be aware that the benefit is permanently reduced by five-ninths of 1% for each month. If you start more than 36 months before your full retirement age, the worker benefit is further reduced by five-twelfths of 1% per month for the rest of retirement.

For example, let’s assume you stop working at age 62. If your full retirement age is 67 and you elect to start benefits at age 62, the reduced benefit calculation is based on 60 months. So, the reduction for the first 36 months is 20% and then another 10% for the remaining 24 months. Overall, your benefits would be permanently reduced by 30%.

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How Does Early Retirement Affect Social Security

Many adults look forward to retirement. And some wouldnt mind leaving the workforce ahead of schedule. But few people think about the drawbacks of retiring early. Few realize that an early retirement might affect their long-term financial plan and their access to certain benefits. A financial advisor can help you figure out all of your retirement and social security issues.

You Want The Money Now

Everything You Need to Know About Social Security Retirement Benefits ...

Even if you don’t need your benefits early to support yourself, you may have other reasons for wanting to take them as soon as possible. Some people, for example, are concerned that Social Security may be unable to meet all of its obligations in the future, so they might as well get theirs now. Others believe they could do better by collecting benefits and investing them, rather than leaving it in the government’s hands.

That said, you would have to be a skilled investor to beat the 6% to 8% guaranteed annual return on your money that Social Security offers to those who wait until full retirement age or later.

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