Social Security - Early Retirement Many people look to social security as part of their retirement income. So, how is social security impacted by early retirement and what age is considered early? As a person nears retirement age, they are faced with a very important decision involving the exact time of their retirement. The Social Security system in the United States has made the age at retirement an important issue. The system allows benefits to begin at the age of 62. This would be considered the earliest actual retirement age for a person expecting to receive benefits from Social Security. The benefits are considerable less than what they would be if the person held off until the normal retirement age of 65 or 66 depending on his date of birth. Waiting until the age of 70 to retire would give an even higher benefit. After the age of 70, the benefit is not going to increase any further. There is no practical reason to delay retirement pass this age from a Social Security standpoint. So, there are really three separate options. You can retire as soon as you can start receiving benefits. This is age 62. You can retire somewhere between 62 and 70 years old for more benefits. Finally, you can retire at age 70 for full benefits. The fact is that you actually end up receiving the same amount of money regardless of which choice that you make assuming you live as long as the statistics say you should. Assume that you live until the age of 80; you will receive the reduced benefits of early retirement for a full 18 years. You will receive the full benefit for only 10 years. The amount of benefit you are paid in those extra 8 years will make up the difference in the larger monthly payment for only 10. So, how do you make the decision? Economic necessity is the reason for many people. In the absence of sufficient retirement savings and with the lack of suitable available work, some people will have to opt for early retirement because they simply have no choice. They need the money. On the other side of the spectrum, people who are enjoying a good tax deferred return on their retirement savings might opt to retire early so that the amount of the Social Security benefit can be retained in the savings account longer earning even more interest. The best time to make this decision from a solid financial planning point of view is early. Although circumstances change, a good retirement plan will have a goal that is set well in advance of retirement age. This goal will be based on the individual’s expectations for retirement. If this goal is early retirement, the means to compensate for the reduced benefit at age 62 would be planned and instituted well in advance. It is human nature for people to expect their own longevity. That is why it is important to realize that if you live to a ripe old age you are going to actually receive a higher sum total of benefits by starting them early. If you would like to discuss your retirement planning options or have questions, please contact us. << Back to Retirement Planning
| 
