At the age of 62, you are eligible to receive payments from Social Security for the first time. However, if you collect your benefits sooner rather than later, the size of your monthly checks will be reduced, perhaps by as much as thirty percent. To ensure that you are eligible for the maximum amount of benefits offered by Social Security, you should delay filing for benefits until you reach the full or normal retirement age. This age threshold is 67 for anybody born in 1960 or after. And if you wait until you're 70 to start collecting your benefits, you'll receive the maximum amount possible.
You can defer receiving your Social Security payments even if you choose early retirement from your job. Married couples may benefit the most from this technique. Still, you should consider the time you'll need to maintain your standard of living until you start receiving social security benefits.
Early Retirement and Social Security Payments
You are welcome to use the Social Security calculator if you are interested in determining the amount of money you will get from Social Security. It calculates how much you'll get based on your yearly salary, the year you were born, and the month and year you decide to begin collecting benefits.
Your highest 35 years of earnings are the ones that are used in the computation of your Social Security payments. The calculation of your AIME by the Social Security Administration is carried out as described above. Your Social Security benefits will be reduced if you retire before you have earned a salary for at least 35 years, which is considered early retirement. That is one of the drawbacks of retiring at a younger age.
You will forego the opportunity to collect delayed retirement credits if you take early retirement from your job. Your monthly retirement payment from Social Security will rise by a predetermined amount every month after you reach your full retirement age; you continue to work up to the age of 70. If you reach the age of full retirement at 67 but do not begin receiving Social Security benefits until three years later, then you are eligible to receive 124% of the amount of your full monthly payment.
If you retire earlier than the typical age of 67, your monthly Social Security payment will be cut by 5/9 of 1% for each month, up to a maximum of 36 months, that you draw benefits before reaching your full retirement age. If you retire more than 36 months before your full retirement age (up to a maximum of 60), your Social Security payment will be lowered by an additional 5/12 of 1% for each consecutive month you retire.
Retiring at 62 rather than waiting till the full retirement age of 67 indicates that the greatest number of months one may spend in retirement is 60. Your benefits may be cut by as much as 30 percent. Social Security determines this limit by multiplying 36 months by a fraction of 1%, equal to 5/9, and then adding a total of 24 months by a fraction of 1%, equal to 5/12.
Can Too Many Early Retirees Affect Social Security?
You may retire whenever you choose, but the total amount of Social Security payments you get throughout your life will remain about the same. This is because of cost-of-living adjustments, which shield elderly citizens from the effects of inflation.
To put it another way, the Social Security system regulates itself. The amount of retirement benefits received by early retirees is often less every month but accrues over a longer period, while the benefit amounts received by late retirees are typically bigger but accrue over a shorter period. Because the quantity of benefits provided does not rely on how early or how late a person retires, there is no impact on the finances of the Social Security program caused by those who retire earlier than expected.
Bottom Line
Early retirement is not an option for everyone. But imagine you're ready to leave your employment before you reach your full retirement age. If this is the case, you must consider how the amount of your Social Security payments could change. If you delay the time you begin receiving Social Security benefits, you will be rewarded with higher monthly payments. Whatever you decide to do, the most important thing is to ensure your money will see you through your whole retirement.
