Benefits and disadvantages of early retirement

Social Security is the reward for working hard and being a part of the system. It is what our parents counted on to help them to survive once they had retired. Baby boomers are expecting a lot more from their retirement than just survival. They want to enjoy retirement and be able to do all the things that they have put off while working and raising a family. 

This will require a lot more money than the Federal Government supplies from your weekly deductions. Before you can decide if you will retire early at 62 or work until your full retirement age, which can be between 66 and 67 years, you need to know how much of your retirement income will be coming from Social Security.

Retiring early, at 62, results in a severe drop in the amount of your monthly Social Security payment. Exactly how long you are going to live, you have no way of knowing. Averages can help you to determine what you’re likely age of death will be but at the end of the day, it is just a guess. Social Security Online has a benefit calculator that will help you when it comes to deciding when you should retire.

Before you try to estimate what your benefit is going to be, you need to know that you will have your 40 quarters of eligible employment completed. When you go to 

the benefit calculator there are three calculators that you can choose, The Quick Calculator, Online Calculator and the Detailed Calculator that you need to download. If you just want a rough idea, you can check the yearly statement that you get in the mail from the Social Security Administration.

Let’s say your income this year is $40,000 and you put that into the quick calculator and ask it what you will make when you retire. If you are 60 today and will retire in 2 years your benefit will be $907 a month. If you are 50 today with the same scenario, you benefit at 62 will be $944. If you are 40 today it will be $1,014.

Now if you wait until 66 or 67 for a 60-year-old it goes up to $1,262, for a 50 year old $1,294 and a 40 year old $1,478. As you can see that is quite a significant difference.

$43,536 is the amount of money you would receive between age 62 and age 66. At age 76 you will have earned $152, 376. If you retire at age 66 at age 76 you will have earned $151,440 at age 76. As long as you live beyond the age of 76 it will be beneficial to wait until you are 66 to start collecting your Social Security if you can afford to. Within a very short time after 76, your larger benefit will outstrip your smaller early retirement income.

Since the average American can expect to live quite some time beyond 76, taking your Social Security benefit early should be a last resort. This does not take into account all the other income you will have from your pension, IRA, and 401K.

Only you can decide if early retirement makes sense to you.