How early retirement affects Social Security benefit
Q: I hope you can help me understand my situation a little bit better. I’ve paid into Social Security for more than 35 years. I retired at 55 and don't intend to go back to work. My full retirement age is 67. I don’t need to start Social Security until 67 or later. I want to be able to provide as much retirement income for my wife, who is six years younger thanme, after I pass.
Is there any way to determine what my Social Security check will be when I turn 67? I've looked at my annual Social Security statement, but it appears that my benefit is based on continuing to work until retirement age. Is that how it works? Will I be penalized for removing myself from the workplace and not contributing any longer to Social Security? — Frank Marcos, Meridian, Idaho
A: The amount of Social Security retirement benefits is based on the average of your earnings (on which Social Security taxes have been paid) for the 35 highest years of earnings, says Joe Matthews, author of Social Security, Medicare and Government Pensions: Get the Most Out of Your Retirement and Medical Benefits.
“So, while you are not technically ‘penalized’ for removing yourself from the workforce when you turned 55, in effect you will have reduced your highest 35-year earnings average because you stopped working at a point when your earnings (had you continued working) would have pushed your average higher,” says Matthews.
As for the annual estimates of retirement benefits you receive from the Social Security Administration, they are based on the assumption that you will continue to work until full retirement age at approximately the same salary as your final year of reported earnings, says Matthews.
“So, in the case of someone who retires at age 55, the estimate of benefits will probably be too high,” he says.
According to Matthews, you can get a more accurate estimate by using one of the more detailed calculators on the SSA’s website.
Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Emailrpowell@allthingsretirement.com.