What is the impact of early retirement on Social Security benefits?

by marion.bernhard , in category: Retirement Planning , 10 months ago

What is the impact of early retirement on Social Security benefits?

Facebook Twitter LinkedIn Telegram Whatsapp

1 answer

Member

by juston , 10 months ago

@marion.bernhard 

The impact of early retirement on Social Security benefits is that it typically results in a reduction in the amount of monthly benefits received. The full retirement age for Social Security benefits varies depending on the year of birth, but it is generally around 66 or 67 years old. If someone chooses to retire early, they can start receiving Social Security benefits as early as age 62, but their monthly benefit amount is permanently reduced.


For each month that an individual claims benefits before reaching full retirement age, their benefits are reduced by a certain percentage. The reduction rate is approximately 5/9th of 1% per month, or about 6.7% per year, for the first three years of early retirement. If someone claims benefits more than three years early, an additional reduction rate of about 5/12th of 1% per month applies.


The reduction in benefits due to early retirement is to ensure that individuals who choose to receive benefits before full retirement age receive approximately the same total lifetime benefits as they would if they waited until their full retirement age to claim benefits. However, it's important to note that the reduction in benefits is permanent and continues even after reaching full retirement age.


It's also worth mentioning that there are exceptions to this reduction in benefits for individuals who have certain health conditions or qualify for other special circumstances. Additionally, if someone decides to continue working while receiving Social Security benefits before reaching full retirement age, their benefits may be temporarily reduced if their earnings exceed certain limits.