How much will my Social Security benefit be reduced if I draw it early?
Retiring early can have a financial cost. Know before you retire how much your Social Security benefits will be reduced if you retire and draw it early.
The current state of the economy has people working longer than in the past and deferring retirement. There are, however, people who wish to retire early for a variety of reasons, some beyond their control. Early retirement can cause a reduction in Social Security benefits, so it is wise to assess your circumstances before you make a final decision.
What is the Social Security retirement age?
Typically, we think of retirement age as 65. But, for Social Security benefits, retirement age is calculated based on your year of birth. The earliest one can collect retirement benefits is age 62, but this is considered early retirement and results in reduced benefits for the rest of the beneficiaries’ life. In order to collect the full benefits to which you’re entitled, you must wait until your official retirement age. To determine your retirement age, go to the Social Security Administration web page, www.ssa.gov and consult the retirement age calculator. This will also help you determine how much your Social Security benefits will be reduced if you retire early.
How much will your Social Security benefits be reduced if you retire early?
There is no one easy answer to this question. How much your Social Security benefits will be reduced if you retire early depends on your official retirement age. Assume you were born in 1950, and you currently have an annual income of $85,000. The earliest you can retire is 2012 when you turn 62. Your monthly benefits if you retire in 2012 will be $1,373.00. If you wait until you turn 70 in 2020, your monthly benefits will be $2,540.00. This means, as you can see, an almost 50% reduction ($1,169.00) in the monthly benefits you will receive for the rest of your life.
Should you retire early?
Some people are forced to retire early due to lack of financial planning, or circumstances beyond their control, such as unforeseen medical or other financial emergencies. Planning now for your retirement is thus a wise course of action. Forewarned is forearmed; knowing how much your Social Security benefits will be reduced if you retire early is the best way to ensure a comfortable retirement and that you will leave something for your dependents when you die.
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