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How Does Retiring at 55 Impact Your Social Security?

How does retiring at age 55 impact your Social Security benefits? Today we have an example created using Social Security’s detailed calculator.

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A 45-year-old couple wants to retire in 10 years. Part of the planning process looks at how retiring at 55 impacts their Social Security benefits.

They provided a copy of their annual Social Security earnings record. (You can get yours by clicking here.) They usually receive a 2% annual cost of living increase. Using this information, we projected their future earnings using Social Security’s Detailed Calculator.

The initial calculations assumed they stopped working at age 55. We compared those to their benefits from working to age 60 and then working to age 62. Here is what we found.

Working to Age 55

By stopping work at age 55, their combined monthly income is $4,644. The lower-earning spouse is claiming a spousal benefit. At age 65, that benefit grew to $6,097, and at age 67, it grew to $7,386. The age 62 benefit is going to be much lower because of the early retirement discounts. Their benefits at age 65 are also discounted because their full retirement age is 67.

Working to Age 60

How did working to age 60 change their benefit? By working to age 60, their combined Social Security benefit at 62 is $4,828. It’s almost $200 more per month. At age 65, their benefit would be $6,339 compared to $6,097. If they wait until age 67, their benefits would increase to $7,678 compared to $7,386. Working an extra five years added about 4% to their retirement benefits.

Working to Age 62

Computing their benefits after working to age 62 was interesting. Working an extra two years (62 versus 60), produced very little change to their retirement benefits. The margin was negligible at best.

Should They Retire at 55?

Does this mean they should work an extra five years? The answer is, “It depends.” There are other factors involved. How much have they saved? What will their health insurance premiums cost? What do they expect to spend?

The impact of retiring at 55 on their Social Security is one factor. If you are considering this strategy, you need to know the numbers. We know working the extra five years is going to boost your Social Security benefits. Increasing those benefits means you can put less stress on your retirement savings.

Retirement planning is complex and involves a lot of different elements. A financial planner can help you evaluate those factors and help you plan for a better future. If you would like to speak to someone, click the link below.

Talk to a Certified Financial Planner™ Professional


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About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors.    He specializes in helping hard working, middle class families plan for retirement.

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