WORKPLACE LAW -
Rules of Retiring Early
Question:
I just turned 62 and I’m thinking of retiring early from my full time job and applying for Social Security, but I’d like to work part time. Are there any disadvantages to retiring early, versus waiting until I am 65?
Answer:
Yes, there are economic disadvantages to retiring at age 62 rather than working until you reach your “full retirement age.” Although you can start receiving Social Security retirement benefits at age 62, if you start receiving benefits before reaching your full retirement age, your benefits will be reduced for each month that you receive benefits before your full retirement age.
Also, if you retire before you reach your full retirement age, any earnings you receive from a part time job will reduce the amount of Social Security benefits you receive. However, if you wait until you attain your full retirement age and then retire, the earnings from a part time job will not have an impact on the amount of your Social Security benefits.
Your full retirement age is the age at which you will become entitled to 100% of the Social Security benefits for which you are eligible. Your full retirement age varies based on the year you were born. Assuming you were born in 1946, your full retirement age is 66. If you choose to start receiving retirement benefits now at age 62, you will get only get 75% of your monthly benefit. If, however, you wait until your full retirement age of 66 to start receiving benefits, you will receive 100% of your benefits without any deductions due to subsequent earnings.
If you decide to work beyond your full retirement age of 66, and you choose to delay receiving Social Security benefits, you will earn additional credits toward your Social Security retirement benefit. Then, when you start receiving Social Security benefits, your benefit payments will be greater than they otherwise would have been. The credits are calculated based the year you were born and the number of months you delay the start of Social Security benefits after reaching full retirement age.
Assuming you were born in 1946, you would receive a credit of 8% of your eligible benefit per year if you chose to work beyond your full retirement age and did not draw benefits. If you delay retiring until age 70, you would be eligible to receive up to 132% of your total retirement benefit. For example, if you are entitled to a $1000 monthly retirement benefit when you turn age 66, but delay collecting social security until you are 70, you would receive $1320 per month based on your delayed retirement credits. Currently, the benefit credit stops at age 70.
Another consideration in deciding whether to retire at age 62 is your eligibility for Medicare. Medicare benefits based on retirement do not begin until a person is 65 years old. If you retire at age 62, you may be able to continue to have medical insurance coverage through your employer, or you may purchase it from a private insurance company until you turn age 65 and become eligible for Medicare.
As you can see, the Social Security Administration is now providing multiple incentives for people to work longer and retire later. Of course, there are many other factors you will need to consider in making your retirement decision, in addition to those discussed here. For more information, and for tables and charts to aid you in making your retirement decision and calculating your own retirement benefits, visit the Social Security Administration website at www.ssa.gov.- - - - - - - - - - - - - - - - - - - - - - - - - -
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