Social Security Retirement: Should I Take It Early?

Coral Gables estate planning attorneys

Social Security Retirement

Although the days of relying entirely on Social Security to fund retirement are long gone, Social Security retirement benefits continue to play a significant role in retirement budgeting for many retirees. If you are one of those, you will have to decide when to start accepting your benefits because choosing early, on time, or late retirement will impact your retirement budget more than you may realize. To make sure you understand the financial repercussions associated with retiring early, the Coral Gables estate planning attorneys at Stivers Law discuss the pros and cons of taking your Social Security retirement benefits early.

Social Security Retirement: The System

The Social Security Retirement system has been around since the 1930s and is based on contributions workers make into the system. While you are employed, you pay into Social Security and then you receive benefits later, when it’s your turn to retire. On your paycheck, the contributions will appear as the Federal Insurance Contributions Act (FICA) taxes. To qualify for benefits when you retire you must accumulate sufficient credits, based on your earnings, over the course of your working years. The amount you need to earn to accumulate a credit has increased over the years to keep up with inflation. For example, for 2022, you get one credit for every $1,510 you earn, up to a limit of four credits per year. Once a credit is earned it remains on your record forever. If you were born after 1929, you need 40 credits to receive Social Security retirement benefits. The earliest you can start receiving payouts from Social Security Retirement is age 62 and the latest is age 70; however, you may choose to begin anywhere in that eight-year span.

How Much Will I Receive in Social Security Retirement Benefits?

Your monthly benefit amount will depend on things such as the age at which you begin receiving benefits and your earnings during the time prior to retirement. You can find out how much you have paid to date as well as get an estimate of what your benefit will be by navigating to the Social Security Administration’s website. You can also download a summary of your benefits, or you can request a statement at any time by calling the SSA (800-772-1213) and asking for a form SSA-7004. Your statement provides a record of your earnings history, the number of credits you have accumulated to date, and an estimate of the retirement benefits available if you wait until full retirement age.

The Pros and Cons of Retiring Early

As of 2022, the “on time” retirement age is set at 67 years old. Early retirement begins at age 62 while you can delay retirement until age 70. If you retire early, your retirement benefit amount will be reduced and if you delay retirement your benefit amount will be increased. There can be a significant difference is your monthly retirement benefit amount if you retire early or late and that increase/decrease will apply for the rest of your life.

If you retire early, your benefit amount is reduced 5/9 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month. For example, if the number of reduction months is 60 (the maximum number for retirement at 62 when normal retirement age is 67), then the benefit is reduced by 30 percent. This maximum reduction is calculated as 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent.

Conversely, your retirement benefit amount is increased by up to eight percent (depending on your year of birth) for every year you delay receiving benefits, up to age 70. In other words, your monthly retirement benefit amount could be up to 24 percent higher than your “on time” retirement benefit or more than twice your early retirement benefit amount.

Contact Coral Gables Estate Planning Attorneys

For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about planning for retirement, contact the experienced Coral Gables estate planning attorneys at Stivers Law by calling (305) 456-3255 to schedule an appointment.

Author Bio

Justin Stivers is the founder and managing attorney of Stivers Law, an estate planning firm specializing in wills, probate, trust administration, and financial risk management services. Justin’s approach goes beyond just creating legal documents. From aligning investments with estate plans to ensuring comprehensive insurance coverage, he safeguards a client’s legacy from unforeseen circumstances. His commitment extends beyond individual transactions, fostering lifelong partnerships to provide ongoing support and guidance.

With an impressive track record, Justin is licensed by the Florida and the Tennessee State Bars. His professional portfolio boasts Series 65 registration as a Registered Investment Advisor, the Wealth Management Specialist™ designation, and a 2-15 License for Health, Life, and Annuities. His dedication to excellence has earned him positions like Board Member of the Estate Planning Council of Greater Miami, Business Eagle Member of the Florida Justice Association, and active membership in esteemed organizations like the American Academy of Estate Planning Attorneys.

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