There are four things you should know about early retirement and social security; how early retirement affects social security benefits, that you are not required to take social security early just because you retire early, how your pension benefits interact with social security, and how working during early retirement affects your social security. Details below.
1. Early Retirement Affects How Your Social Security Benefits Are Calculated
The estimates you see on your social security statement are based on working until that stated age. For example, if your social security statement says you will get $1,100 a month at age 62, that estimate assumes you work until you turn 62. This means if you take early retirement your social security benefits may be less than what you see on your statement.
- Learn more: Should You Take Social Security at Age 62
Social security benefits are calculated based on your highest thirty-five years of work history, with the highest 35 determined after each year of work has been indexed for inflation. If you take early retirement and you do not have a full thirty-five years of work history, your social security benefits may be lower than if you work longer.
2. You Can Take Early Retirement, But Delay Social Security
You can take early retirement and still wait until a later age to begin your social security benefits. You would do this if you expect to have a longer than average life expectancy, of if you want to make sure your surviving spouse gets a larger benefit once you are gone.
- Learn more:
- Using Delayed Retirement Credits
- Key Things To Know About The Social Security Spouse Benefit
3. Pension Benefits May Go Down When You Are Social Security Eligible
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 so you fully understand your pension and health benefits prior to taking early retirement. Ask plenty of questions, and set a one-on-one appointment with a benefits advisor or HR person if you can.
4. Working During Early Retirement Affects Social Security
If you plan on working part-time during early retirement your social security benefits may be reduced. The reduction is based on something called the social security earnings limit, and it only applies if you have not yet reached full retirement age.
- Learn more: Social Security Earnings Limit
Learn more: Calculate Social Security Based On Early Retirement
Want to calculate your social security benefits based on early retirement? Here are 6 Social Security Calculators To Try.
Or curious to see how much you know about your social security benefits? Take this 10 item Social Security Quiz to find out.