This Will Affect Your Social Security Benefits

Being able to meet your savings goals and retire is something to be proud of; years of planning and savings went into this accomplishment.


The current average retirement age is 66 years old, and while retiring earlier than this age sounds good, you may incur some issues with your social security benefits.

It’s essential always to be prepared for various financial situations, so let’s take a look at how retiring early affects your social security benefits.

How are Social Security Benefits Estimated?

You can begin collecting social security benefits at the age of 62; however, the earlier you start collecting your social security checks, the less the amount you’re eligible for will be. This is because your social security payments are based on 35 years of your highest earnings. When you opt to retire early, your years of non-earning will be factored into your earning years and lower the amount available to you when you begin to collect.

If you hold off on retiring to age 67, you are eligible for 124% of your benefits. However, when you retire early, this benefit percentage may see a reduction.

On a side note, taking early retirement can also affect your pension payments as they can go down once you begin to collect social security. Check with your employer or HR department on company pension terms and regulations.

If you need further assistance in calculating your social security payments, there are online calculators you can use to estimate; this can make preparing for your retirement accurately easier.

Delay Social Security Payments

If you are continuing to plan on retiring early, you can protect your social security benefits to an extent by delaying the age at which you begin to collect on your benefits. Those who do this will utilize their savings and other benefits in the meantime so that they can maximize their benefits as much as possible before drawing against them.

Working After Early Retirement

Some people plan to retire early but continue working part-time to supplement their incomes or savings. Unfortunately, this plan can backfire due to limitations placed on social security earnings. If a retiree is 67 years or younger, their work can potentially reduce their benefits if they exceed the limits put in place.

The upside to this is that once a retiree hits their full retirement age, the government will recalculate benefits and release any funding that was withheld.

Your Decision

Retiring early may not be for everyone considering the factors mentioned above. Before making your decision, it’s important to weigh how these factors will affect your overall retirement plan and make adjustments accordingly if you decide to proceed with early retirement.

As with any new financial decision, be sure to restructure your budget and savings plan to accommodate the changes. Consider the following:

  • How important is retiring early to me? What benefits will I obtain by leaving the workforce earlier than previously expected?
  • Will money be lost by retiring early? If so, how much and how will it affect my retirement living and goals?
  • Is putting off drawing on social security an option? If so, for how long and will my savings alone sustain me comfortably during this time?

Early retirement is a choice that will increase the life span that I need to prepare for; because of this, do I need to restructure my savings to accommodate early retirement? Will my budget provide further saving to reach the goal of early retirement?

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