Retiring Early Can Affect Your Benefits Of Social Security

early retirement

Everyone who works everyday of their adult life is working towards their retirement.  We all have the same dream when it comes to retiring.  We want to live the life of luxury without the worries of where our daily living money is going to come from and whether or not we can do what we want to do.  For this many of us will depend on our social security benefits.  However what many do not know is that if we retire early that might affect the benefits of our social security might offer us this means that you will have to save more of your own money.  This article will show you several different ways that your social security will be affected if you choose to retire early.


When you decide you want to retire you will need to have at least forty credits of work I order to be eligible to receive a social security benefit.  You earn your credit for every set amount of dollars you have earned.  And can earn up to four credits per year.  In the year 2012 you were able to earn one credit for every $1,130 you earned.  Most people who have worked for at least ten years and paid social security taxes are eligible for a social security benefit.

Average Earnings

When you are speaking about social security payouts these are usually calculated and figured by using the average indexed monthly earnings (AIME).  When figuring this calculation it will involved indexing the entire amount of your earnings history to show any changes in the level of your earned wages and the standard of living throughout your career experience.  Then the highest thirty-five years will be totaled and that is what will be average to figure your monthly earnings amount.


Once you have figured out what your average indexed monthly earnings are then you will be able to use this amount to calculate how much the amount will be for your primary insurance amount.  This is the amount that you will get if you claim social security at your full retirement age.  In the year 2012 this amount was figured this way: ninety percent of the first $767 of your average indexed monthly earnings, thirty-two percent of the average indexed monthly earning for anything over the amount of $767 and under $4624 and fifteen percent of your average indexed monthly earnings for anything amount over $4624.  It is possible that these amounts can change in the years to come.  The benefit amounts that are paid out will also change depending on what age you retire.  If you retire before your full retirement age you will find that the amount is decreased dramatically compared to the amount you are paid if you wait until your are the appropriate retirement age of seventy years old.

Early Retirement

If you opt for an early retirement you will realize quickly that the formula will be changed in a couple of important ways.  When you decide to retire early you are probably retiring during the peak years where you are making the most amount of money.  Retiring now will cause you to see a reduction in your average earnings figure and will reduce the amount of your social security benefit.  If you are retiring with less than thirty-five years of collecting social security you will have zeros for the amounts figured for those years.  This will also dramatically decrease your amount of the benefit.

Everyone looks forward to the day where they can retire and live in the life of luxury.  However if you do not plan correctly you might not be able to afford to live that way.  A smart retirement takes planning and being smart on your part.

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About the Author: Jay

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