What Retiring at 62 Means for Your Social Security Benefits

Retiring early sounds like a dream come true, doesn’t it? But before you start planning your days of leisure, it’s important to understand how retiring at 62 will impact your Social Security benefits.

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If you’re considering this option, here’s a quick look at how early retirement could affect the amount you receive .

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The Basics of Social Security Benefits

According to the Social Secuity Administration, “Social Security provides financial protection for our nation’s people, supporting Americans throughout all of life’s journeys.”

While there are other situations in which you could receive benefits (such as a disability preventing you from working), most people get benefits as support during retirement.

Your benefits are based on your lifetime earnings and the age at which you start claiming them. The longer you work and the later you start claiming, the higher your monthly benefits will be.

Full Retirement Age vs. Early Retirement Age

Your Full Retirement Age (FRA) is the age at which you qualify for 100% of your Social Security benefits. For most people, this is between 66 and 67 years old, depending on your birth year.

Retiring at 62 means you’re choosing early retirement, which leads to a reduction in your monthly benefits.

How Much Will Your Benefits Be Reduced?

When you retire at 62, your benefits will be permanently reduced. The reduction can be up to 30% less than what you would receive at your FRA.

For example, if your FRA benefit is $1,000 per month, retiring at 62 could reduce it as much as $750 per month. And this reduction stays with you for the rest of your life.

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The Impact on Lifetime Benefits

Retiring early means you start receiving benefits sooner, but the amount is lower each month than it would’ve been had you waited.

Over a lifetime, if you live to an average life expectancy, the total amount received might be similar whether you retire at 62 or at your FRA. However, if you live longer than average, waiting until your FRA or later could result in higher lifetime benefits.

Working While Receiving Early Benefits

If you plan to work while receiving early retirement benefits, you should be aware of the earnings limit. In 2024, if you earn more than $22,320 annually, your benefits will be temporarily reduced by $1 for every $2 you earn over the limit.

Once you reach your FRA, these reductions no longer apply, and your benefits may be recalculated to give you credit for withheld amounts.

Spousal and Survivor Benefits

Your decision to retire at 62 can also affect your spouse’s and survivor’s benefits. If your spouse claims benefits based on your work record and you retire early, their benefits will be reduced as well.

Additionally, if you pass away, the survivor benefits for your spouse will also be lower due to the early retirement reduction.

Health Insurance Considerations

Another important factor is health insurance. Medicare coverage doesn’t begin until age 65, so if you retire at 62, you’ll need to find alternative health insurance until you’re eligible for Medicare. This added expense should be factored into your retirement planning.

Making the Decision: Key Takeaways

Deciding to retire at 62 is a personal choice and depends on your financial situation, health and retirement goals. Here are a few things you can do to decide if early retirement is right for you:

• Evaluate your financial needs : Ensure you have enough savings and other income sources to cover your expenses with reduced benefits.
• Consider your health and longevity : If you’re in good health and have a family history of longevity, waiting to claim benefits might be beneficial.
• Factor in other income : Working while claiming benefits before FRA can lead to temporary reductions.
• Plan for healthcare costs : Find a way to bridge the gap until Medicare starts.

Retiring at 62 can be a great option if you’re prepared for the financial adjustments. Understanding the impact on your Social Security benefits will help you make an informed decision and enjoy a comfortable retirement.

This article originally appeared on GOBankingRates.com : What Retiring at 62 Means for Your Social Security Benefits