Early retirement can have a significant impact on Social Security benefits, influencing both the amount received and the timing of payments. Social Security benefits are calculated based on an individual’s highest-earning 35 years, meaning that retiring early can reduce lifetime earnings and, consequently, the monthly benefit amount. Additionally, claiming benefits before reaching full retirement age (FRA) results in a permanent reduction in monthly payments, while delaying benefits beyond FRA can lead to an increase. Understanding how early retirement affects Social Security is essential for making informed financial decisions and ensuring long-term financial stability.

A financial advisor can help you figure out all of your retirement and social security issues.

When Can I Get Social Security?

The earliest you can start receiving Social Security benefits is age 62. The earlier you elect to receive your benefits, however, the smaller your monthly checks will be (decreasing by as much as 30%). To receive full benefits, you will have to avoid collecting Social Security until you reach your full (or normal) retirement age. For people born in 1960 or later, that age is 67. And with the delayed retirement credits, you can get your largest benefit at age 70.

If you decide to retire early, you have the option of delaying your Social Security benefits. This strategy may work particularly well for married couples but you have to factor in the amount of time you’ll need to fund your lifestyle until social security kicks in.

Early Retirement and Social Security Payments

If you’re wondering how much you’ll get from Social Security, you can check out our Social Security calculator. It estimates how much you’ll earn depending on your annual income, the year you were born and when you choose to start receiving benefits.

The calculations for Social Security benefits come from your highest 35 years of earnings. That’s how the Social Security Administration comes up with your average monthly indexed earnings (AIME). If you retire too early (i.e. before earning a paycheck for at least 35 years), you’ll receive less Social Security. That’s the downside to early retirement.

By retiring early, you’ll also miss out on the chance to claim delayed retirement credits. Social Security increases a percentage of your retirement benefits each month that you delay after full retirement age until you turn 70. So if your full retirement age is 67 but you avoid taking Social Security until three years later, then you can claim 124% of your full monthly benefit amount.

The table below comes from the Social Security Administration’s benefits retirement planner and calculates the monthly increase rate by birth year:

Delayed Retirement Increase

By comparison, if you choose to retire early, your Social Security check gets reduced by 5/9 of 1% for each month you collect benefits before your full retirement age (up to 36 months). If you retire more than 36 months early (up to a maximum of 60), your Social Security benefit will be reduced by an additional 5/12 of 1% per extra month.

This means that the maximum number of retirement months is 60 for those retiring at age 62 when the full retirement age is 67. So your benefits could be reduced by up to 30%. Social Security calculates this maximum by multiplying 36 months by 5/9 of 1% and then adds a total of 24 months multiplied by 5/12 of 1%.

What If I Want to Work in Retirement?

Sometimes leaving the workforce is neither feasible nor appealing. That’s why some retirees find part-time jobs to pass the time or earn extra money. Getting a part-time job after retiring early may reduce your benefit amount until you reach full retirement age. The SSA may withhold a certain amount of money from your benefit check if your earnings exceed the annual limit.

For 2025, your benefits will be reduced by $1 for every $2 you earn above $23,400. If you reach your full retirement age in 2025, your benefits will be reduced by $1 for every $3 you earn above a different limit ($62,160) up until the month you turn 67.

The SSA doesn’t penalize working retirees forever. You’ll receive all of the benefits the government withheld after you reach your full retirement age. At that time, the SSA recalculates your benefit amount.

Can Too Many Early Retirees Affect Social Security?

Yes, too many early retirees can affect Social Security, potentially straining the program’s financial stability. Social Security operates as a pay-as-you-go system, where current workers fund benefits for retirees through payroll taxes. If a large number of people retire early, fewer workers contribute to the system while more individuals start collecting benefits sooner and for a longer period.

This can accelerate the depletion of the Social Security Trust Fund, increasing concerns about future benefit reductions or the need for policy changes, such as higher payroll taxes or adjustments to retirement age. Monitoring retirement trends is crucial to ensuring the long-term sustainability of Social Security.

Bottom Line

Not everyone can retire early, but let’s say you’re preparing to quit your job before you reach your full retirement age. In that case, it’s important to think about how that might affect the size of your Social Security checks. If you can wait to take Social Security, you’ll end up with larger benefit checks. Whatever you choose to do, it’s best to make sure your money will last throughout your entire retirement.

Tips for Retirement Planning

• Retirement planning with a financial advisor can be extremely helpful. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Figure out how much you’ll need to save to retire comfortably. An easy way to get ahead on saving for retirement is by taking advantage of employer 401(k) matching.

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