How Social Security Works When It Comes To Early Retirement

Many people dream of retiring early. However, many people assume that official retirement means they can collect on their social security. Yes, you can collect, but there are hurdles and caveats that you need to understand and factor into your early retirement plans.

Age Is Just a Number

It's true that all the money you managed to contribute to social security over the years is still waiting for you. Unfortunately, it's waiting for a slightly older version of you to come claim it.

No matter when you retire, 62 represents the earliest age at which you can start collecting your social security benefits. No matter what age you plan to retire at, the SSA considers 62 as early retirement.

How Early is Too Early?

The current full retirement age is 67, if you were born after 1960.  It's at that age you can receive your full benefits. It's still possible to receive full benefits at 66 if you were born before 1960, however.

If you attempt to collect at any time before that, you will face a permanent reduction in the amount you can claim. For each year away from your full retirement age, that percentage will increase. If you try to collect at 62, you're hit with a hefty 30% reduction.

Understand that if you take a permanently reduced amount, it doesn't change when you reach the official retirement age. It will remain the same, even if you pass away and the benefits transfer to your spouse.

You Can Still Wait it Out

If your other retirement funds can see you through, it's possible to wait until retirement age before you start collecting social security. In fact, if you can hold off until around 70, you can even receive a benefit increase.

The main problem with this scenario is that most other retirement funds frown on you collecting early as well. That includes your 401k and any other fund that's specifically earmarked for retirement.

If You Don't Care about the Reduction

If you don't mind the fact that your social security benefits will face a heavy, permanent reduction, you still may have an uphill battle when you're ready to collect. If you plan to retire early, you will need help.

You still will want to collect as much of your rightful benefits as possible. You'll also want to collect in a way that doesn't present you with hassles. To that end, you should certainly include a social security attorney in your early retirement plans.