If you claim early Social Security, you will be getting less in the way of monthly benefits. For most people working now, the full retirement age is 67, but people can claim an early benefit as early as age 62. But by claiming your Social Security at age 62, you will be decreasing your monthly payment about 30%. According to the Social Security Administration, the reduced monthly payment averages out to someone who waits until age 67 as you will be getting five years of smaller checks with the average lifespan. But there are some ways a person can still retire early and increase their Social Security benefits. As everyone’s situation is unique, please consider all aspects of retirement before making any decision. And if you need to seek the advice of a financial planner. Of course, if you work until age 70 your monthly benefit will be about 24% higher than if you retired at age 67.
The projected average monthly Social Security benefit is estimated to be $1,344 or about $16,000 a year. That is not very much to live on unless you have substantial savings that will supplement your benefits. Or if you are lucky enough to have a pension that can help substitute your loss of income. If you can work until age 67 which is most of our full retirement ages your monthly benefit is expected to be $2,639 or about $32,000 annually. If you want to retire early, there are some ways in which you can increase your benefits.
One of the best ways is to work a little longer and go past age 62 before you retire. By delaying your retirement say two years, you can still retire at age 64 while increasing your early retirement benefit about 12%. Another option is to work more while you are working as benefits are based on your highest 35 years of wage earning years. If you only have 32 years of work history, then your calculation will include three years at zero. By working the extra three years, you will increase your average and thereby increase your benefit. If you already have the 35 years, you can take a promotion or work extra jobs to increase your salary that will be included in your 35 years of pay. The key is to get your average as high as possible to maximize your benefits.
Now, if you claim your benefits early and decide to continue to work, you may be shocked to find out that your benefits will be reduced for earnings over a certain limit. In 2016 early retirees can earn $15,720 before any penalties are imposed on their benefits. And if you earn over that amount your benefit will be reduced a $1 for every $2 you earn over the $15,720. But do not worry too much as the Social Security Administration will adjust your benefit up once you have reached your full retirement age.
Now say you have claimed your benefits early and later decide you do not want to collect your benefits. Well, there is a remedy for that, and it calls for you to fill out SSA Form 521 and repay every cent that you received in benefits. The catch here is you only have twelve months in which to make this decision and file SSA Form 521 to reverse the early filing. Then you are free to work until your full retirement age or age 70 to collect the maximum benefit you are entitled to by law.
Early retirement is almost everyone’s dream, but it is not always a reality for most. Benefits can start as early as age 62 with some severe penalties and can be delayed until age 70 with some nice guaranteed returns. If you retire in the eight years between 62 and 70, you can expect a percentage of the extremes.
The key to a successful retirement is to save early and often and use proper planning for your retirement years. It is never too early to take a retirement seminar offered from a financial planner or through your place of work. In fact, the sooner you can enroll in one of these the better off you will be when it comes time to retire. If you wait until the age at which people generally take these seminars, it may be too late for you to save properly and prepare. The key is to start early with your retirement plans.
If you need more information or have any questions, feel free to contact me directly or leave a comment with the post.
