Social Security Early Retirement

Big Decision: Do you being Social Security Early Retirement Benefits at age 62 (reduced payment), or wait until Full Retirement Age (age 65, 66, 67)? 

Social Security is full of big decisions -- one time decisions -- and it really pays to take the time to learn more and know your options!

There are no easy answers.

Lifetime reduction of monthly Social Security benefits - Early retirement will reduce your Social Security income for the rest of your life!

Just think, if you choose to retire at age 62 under that Social Security Early Retirement benefit, instead of waiting for the full retirement benefit at age 65-67 (or even some point in between), you will draw that reduced benefit for the rest of your life.

Let's assume you live to age 85, and start Social Security at age 62, you will receive that reduced benefit for 23 years - with only a small cost-of-living adjustment each year.

If you are the primary wage earner of your family, and you retire early, your benefit will affect your spouses benefit if he/she draws from your benefit (giving you two reduced benefits). Think twice!

First, the Lifetime reduction of monthly Social Security benefit - If you have a decent pension or 401K, maybe you can start Social Security at age 62 - possibly even banking the payments for later in life.

However, If your retirement income depends on Social Security, you might want to think twice -- your lifetime monthly Social Security payment is reduced, based on your age, if you begin to receive those payments early. If you lock in the Social Security Early Retirement payment at age 62, you don't have a second chance to increase that payment!

Not long ago, I met with several single women, age 65+, who chose to remain working. They receive full Social Security benefits, as they were full retirement age, and there is no reduction for continued employment (no social security income limit) at full retirement age. They choose to remain employed, banking their Social Security payments for sometime later after they actually retire - and for now, they continue to work. They DO get an increase in their Social Security benefit each year for the increased earnings too. It's a Win-Win in their eyes! 

Second, Three years of payments and you are ahead of the game...If you choose to start receiving your Social Security Early Retirement payment at age 62, you gain three years that someone who waits doesn't get... and at the increase they receive for waiting, it takes many years (maybe 11 years or more) before they break even for waiting for the increased benefit. It depends on your life expectancy, how many years you expect to draw that reduced payment, on whether its worth drawing early or not.

As shown above, for example, you get $1000/month from Social Security. That's $12,000 each year, right? Over three years from 62-65 (and it could be longer depending on your own "full retirement age"), you could have drawn $36,000 already... and if your "full retirement age" is 66-67, you could save even more (assuming you are employed).

As with most retirement decisions, no easy answers, but at least you are considering the options!