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Social Security affects your retirement benefits by replacing a portion of your earnings when you retire. Each year, you receive a social security statement that shows the details of your earnings for each year that you worked. It's important that you check this statement because your retirement benefits will be based upon your lifetime earnings. It is estimated that on average, people that wait until their full retirement receive about 40% of their final income. Most people need 40 credits (10 years of work) to qualify for benefits.

Choosing When to Retire

This is one of the most important decisions that you will ever make because if you choose to retire at your full retirement age, you will receive full benefits but if you choose to take your retirement benefits before this time period, you will receive less benefits for the rest of your life. For people born after 1937, the full retirement age increases per guidelines until the retirement age becomes 67 for people born during 1960. This decision definitely affects your social security retirement benefits.

Early Retirement

If you retire early at age 62, your social security retirement benefits are affected since you will only get 77.5% of your full benefit. However, if you wait until age 65, this amount is adjusted upward by almost 7% per year.

If You Work and Receive Benefits

If you continue to work while receiving early retirement benefits, your benefits will initially be reduced by $1 for every $2 earned. This amount will adjust itself until the year that you would have received full retirement to $1 for every $3 earned. After reaching full retirement age, you can earn without any limitations.

Retirement Benefits for Widows, Widowers, Children, Family Members and Divorced Spouses

Depending upon circumstances, your children may be eligible to receive up to 180% of your retirement benefits and your spouse or former spouses may be able to receive benefits depending upon how long you were married and whether your benefits exceed their benefits. This subject should be discussed with a social security expert because the rules are complicated.

In short, your social security affects your retirement benefits in a very significant manner.