If you were born in 1960, you may be considering taking the early retirement benefits available from the Social Security Administration. Getting your Social Security benefit at age 62 rather than waiting another five years until you are 67 certainly appears to have its advantages until you consider the price you pay.
The maximum monthly retirement benefit anyone can receive from Social Security in 2022 is $3,345, but the maximum monthly benefit for someone applying for benefits at age 62 is $2,364. According to the Social Security Administration, the average monthly benefit currently paid to retired workers is $1,664.
This article looks at early retirement benefits to help you decide whether the advantages outweigh the disadvantages. It also looks at the effect of early retirement on disability benefits. If you have questions about how early retirement may affect you, contact a disability lawyer at Liner Legal Disability Lawyers for a free consultation.
Key points to consider before applying for early retirement benefits
The monthly benefit that you would be entitled to receive at full retirement age, which is 67 for anyone born in or after 1960 is based on your lifetime earnings record at jobs or self-employment that were subject to payment of Social Security taxes. The maximum benefit a person can receive each month is $3,345, but the average worker does not accumulate lifetime wages to reach the maximum benefit. According to the SSA, the average retired worker receives $1,664 in retirement benefits, but the average Social Security benefit at age 62 is $1,480 per month.
The reduced benefit that you receive by retiring early continues to affect what you receive even after you reach full retirement age. The benefit reduction because of early retirement does not end when you reach full retirement age. Instead, it continues to affect you for as long as you receive benefits.
Other factors to consider about early retirement include:
- If you continue to work while collecting early retirement benefits, the money you earn from working reduces the benefits you receive. The 2022 annual earnings limit is $19,560, so anything earned in excess of it reduces your monthly Social Security benefit by $1 for every $2 earned in excess of the limit. Once you reach full retirement at age 67, an earnings limit no longer applies
- Evaluate your health and family history before applying for benefits at age 62. It may be better to wait for full retirement benefits if you are in good health and have the potential for a long-life expectancy based on your family history. The early retirement reduction in the monthly benefit that you get adds up to a significant loss over the remainder of your lifetime.
- Consider the cost of health insurance premiums you incur by taking early retirement. If you currently have coverage through your employer, the increased cost of buying a policy to cover you, your spouse, and your dependent children can be significant. Medicare coverage does not begin until you reach age 65, so you must decide if the added cost of health insurance makes it worthwhile to stop working to take early retirement.
If you qualify to receive benefits through the Supplemental Security Income program, early retirement may affect your SSI benefit. Social Security retirement benefits represent income that must be reported to Social Security. It may reduce your monthly SSI benefit, so talk to an SSI lawyer at Liner Legal Disability Lawyers. There are income exclusions that may limit the effect of the additional income on your SSI benefit
Social Security Disability Insurance and early retirement
If you are disabled, you should take to an SSD lawyer at Liner Legal before applying for early retirement. The amount that you receive as your monthly SSDI benefit generally equals the Social Security retirement benefit you will receive at full retirement age. Submitting an application and qualifying for SSDI avoids the benefit reduction of early retirement.
At full retirement age, the SSDI benefit automatically converts to a retirement benefit without any change in what you receive each month. In fact, people who receive worker’s compensation while receiving SSDI may see an increase when the payments convert to retirement benefits because the worker’s compensation benefit may have reduced the benefit from SSDI.
Depending upon the specific circumstances of your SSDI claim, you may have the option of submitting an application for early retirement to begin receiving monthly payments while waiting for a decision on your SSDI claim. If Social Security determines that the onset date of your disability was prior to your application for early retirement, you are not subject to the benefit reduction of early retirement.
Get advice about your Social Security benefits
Learn more about options available for your Social Security benefit at age 62 during a free consultation with an SSD lawyer at Liner Legal Disability Lawyers. Contact them today to schedule a consultation.