How Does Early Retirement Affect Your Social Security Benefits

You are allowed to receive your Social Security retirement benefits as early as 62, but you should know that your monthly payment will be significantly lower than if you retired at 70. You will not be able to get your full retirement amount. Your Social Security benefits will be reduced by the amount of months you have left until you reach full retirement age.

Eligibility: In order to receive SS benefits, you will need 40 credits of work in your file. Generally, if you worked for at least 10 years and have been paying taxes to Social Security, then you are likely to be eligible for Social Security benefits.

Average earnings: The average amount you can receive a month is figured out by using the average index monthly earning — AIME. This will also be adjusted with changes in wages as well as the standard of living during your working career. The 35 highest years that you worked, will then be added up and averaged to a monthly earning that you will receive.

Payouts: The AIME that was just used above is now used for monthly payments toward finding out your primary insurance amount — PIA. This is the amount you will receive if you claim SS benefits at your full retirement age. The formula for PIA is:

• 90 percent of the first $767 of your AIME, plus
• 32 percent of your AIME over $767 and through $4,624, plus
• 15 percent of your AIME over $4,624

The benefit payouts are decreased if you want to claim benefits before you are full retirement age, but may increase if you wait until the age of 70 to claim. It is important to remember that early retirement can affect these numbers. If you retire and don’t have 35 working years, Social Security will place zeros in, which can significantly decrease your monthly payment.

If you plan on depending on Social Security benefits, it is best to wait as long as possible to retire so you are getting the highest amount. If you do have health problems, there are exceptions to early retirement. Ask a Social Security disability lawyer for help during this time.