Does Retiring Early Reduce Your Social Security Benefit? - (How Much?)
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- Äas pĆidĂĄn 18. 05. 2024
- Have you factored in the reduction of your Social Security benefit in retiring early? Does it have a meaningful impact on your retirement plan? You can schedule an appointment with one of our Retirement Experts to look at your situation and help you plan for your future. Call us at (920) 544-0576 or go to www.safeguardinvest.com/contact.
Timestamps:
0:00 What is the Effect of Retiring Early on Social Security?
0:13 How Your S.S. Benefit is Calculated...
3:10 The Impact on S.S. is a Spectrum
4:15 Case Study #2 - A Higher Earner
5:51 Case Study #1 - A Lower Earner
6:45 Takeaways from Retiring Early
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Always remember, "You Don't Need More Money; You Need a Better Plan"
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I did the math on the ss website. They have a great "what if" calculator. I retired at 64. I have a solid base of 35 earning years approaching or hitting the FICA cap. So if I kept working, the money I'd pay in FICA would pretty much be a waste. It wouldn't improve my draw at 70 when I plan to claim but a couple dollars a month. Seriously, only a couple dollars a month. And that would cost me around $15k a year for the next 5 years. Can't imagine a worse investment.
Your older earnings will be more than an equal amount earned later since they're all indexed, if you're looking at knocking out lower earning years.
There is also a calculator on the SSA website where you can set when you stop working, and when you claim benefits. Doing manually is not hard though
For me, adding a year of work only adds about 4-5 dollars a month. Not enough to care about. That 15% roi and it's replacing a year I had income means not a lot of benefit.
My last year of work had about 3x the earnings as the earlier adjusted year it replaced. At my FRA it appears that last year increased my benefit by $22/month. (I have a few years before I can claim SocSec and then 5 more to reach FRA).
Good explanation. Thank you.
Another good discussion of the data Eric. This will be very useful for those that might be considering these decisions. Thanks for all you do and keep up the great content. Larry, Central Valley, Ca.
Excellent! It always boils down to time vs. $. In this case it makes no sense to work more for such a little return. Keepâem coming!
I have done this manually I got the inflation numbers for my year of retirement and calculated the bend points SSA is low by around 20% this is because I make a high salary and they are using national averages for the estimate they give you, for most people itâs close enough but not for high earners. For me I am well into the third bend point meaning if I work more wonât change my payout much
I hope that viewers read your slides carefully so that they understand that when you say "retire early" you mean stop working but you do not mean apply for social security early. Your discussion correctly analyzes the effect of forgoing more working years while leaving the date on which you apply for retirement benefits the same. Especially for people of modest means, deciding to "retire" means both stopping working and applying for social security at that time. This is because they don't have the money to stop working and live off savings. If they stop working, they need to apply for social security to pay for their living expenses. Of course, applying for social security retirement benefits at an earlier date rather than a later date has a substantial negative effect on those retirement benefits. Thanks for all of your informative content.
I'm an advisor and I love your videos. I'm glad you're a thousand miles away. :)
I'm not sure if you've noticed you have an error in your title you probably want to fix.
Thanks, always good. Typo - reduce not reduces. Does the % impact work for years worked also, or just divide by 35 multiply by years worked ? I only paid in for 24 years.
Why are there no videos on how to plan for retirement with the uncertainty on future social security payment when the SS Trust fund runs out? All these SS talk about when to take SS is pretty mute without talking about the fund running out. Havenât heard one financials advisor talk about it
I'm waaaay past the second bend. Another year of working nets me a whopping $50 more per month. Whoop de doo.
So....What are all these other supposed financial advisors talking about, saying that you will get so much more by waiting until age 70? I really never believed that, though it really doesn't matter to me. I'm going to retire as soon as possible.
There are two dates that you "retire" as far as it's related to Social Security. The first is the date you stop pulling in W-2 income at a job, which is what this video is about. The second "retirement" date, which it sounds like is what you are talking about, is the date you start claiming your SS benefit. The date you stop working impacts your SS benefit at FRA (Full Retirement Age), which is 65-67 and different depending upon when you were born. You can then claim SS as early as 62 for a reduced benefit or as late as 70 for an increased benefit (no increase to waiting past 70). This video is talking about when you stop working, but the decision on when to claim SS is a separate, although related, decision.
I retired at 62 but won't file for benefits until I'm 67. I have over 40 earning years so I think I shouldn't lose too much.
I retired at 58, pension, if I had kept working until 67 I would have collected a whopping $100 more per month. Meanwhile I will enjoy 9 yrs not working. It was a no brained.
How about convert traditional 401k to Roth from 55 or 59 and half to 62. It counts as income so does that add more money to SS?
Your Social Security is based on your highest 35 years of earnings, in other words, wages from a job. Specifically, wages that you paid FICA Taxes on. So, Roth conversions would not count to increase your eventual Social Security benefit.
@@johnscott2746 OK thank you for clarifying.
This is why I don't factor Social Security into my retirement and look at any money from it as a surprise bonus. I don't even know if SS will be around in its current form by the time I'm 62+
It will be around, all be it at a potentially decreased rate..... Unless the government fixes it...
They will wait until the year it's impending doooom
who cares, 10 years ss empty
Another good discussion and information Eric. This should be very useful to those who may be considering these decisions. Thanks for all you do and keep up the great content. Larry, Central Valley, Ca.