Does Retiring Early Reduce Your Social Security Benefit? - (How Much?)

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).

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 it’s close enough but not for high earners. For me I am well into the third bend point meaning if I work more won’t 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.

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. Keep’em coming!

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. Haven’t 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.

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.

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.

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?

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+

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.