Early Retirement and Social Security
A person does not have to wait until he reaches full retirement age to retire. In fact, any person with enough working credits can retire at age 62. However, retiring early reduces the monthly benefit amount of the retiree. The full retirement age is 65 for those born before 1937, 66 for those born before 1954 and 67 for those born 1960 and later.
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Monthly Benefit Reduction
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A person is eligible to retire early when she reaches age 62. Doing so will reduce her Social Security benefits by a percentage each month. The percentage deducted monthly depends on how far the retiree is from her full retirement age, and the amount of her monthly payment. For instance, someone whose full retirement age is 65 can retire at age 62, but her full retirement payment of $1,000 will be reduced to $800 a month.
Pros and Cons
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There are pros and cons to early retirement. Those who choose to retire early may have their monthly benefits reduced, but the time period a person receives benefits will be longer. A person who waits until he reaches full retirement age may have larger monthly benefit payments, but the time frame that he receives the benefits will be shorter. The larger payments make up for the months that he did not receive any payments, but in the end taking either late or early retirement will typically average out to the same amount of Social Security benefits.
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Significance of Working Credits
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One factor with early retirement and Social Security is to have earned enough working credits. It does not matter if a person is eligible to retire early if she has not earned enough working credits to receive Social Security. Each year, a person is eligible to receive up to four working credits. In 2009, a person can earn one working credit for each $1,090 he makes. The number of working credits needed to receive Social Security benefits are 40 or more for those born in 1929 or later, and fewer than 40 for those born before 1929. Working credits only determine a person's eligibility to receive Social Security benefits; his average earnings over the years determine what his monthly payments will be.
When to Apply
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There is a time frame in which a retiree can apply for early retirement and Social Security benefits. If she plans on retiring at age 62, she will need to apply three months before her 62nd birthday. This way, she can begin receiving her benefits when she turns 62. In order to receive the entire monthly payment amount, a retiree must be 62 for that entire month. If the retiree is not 62 for the entire month, she will not receive her first monthly payment until the next month.
Effects on Spouse
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A spouse of a retiree is eligible to receive early retirement and Social Security benefits from his wife as well. However, his early retirement benefit amount will also be reduced. For instance, if the spouse is eligible to receive $500 a month at the full retirement age of 66, his payment will be reduced by 30 percent to $350 a month if he takes early retirement at age 62.
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