Early or Late Retirement (2024)

FAQs

Is it better to retire early or late? ›

A worker can choose to retire as early as age 62, but doing so may result in a reduction of as much as 30 percent. Starting to receive benefits after normal retirement age may result in larger benefits. With delayed retirement credits, a person can receive his or her largest benefit by retiring at age 70.

Start Collecting Early

He claims that doing so will give you a greater return than you would get by waiting until a later age to apply for Social Security, which means you get a bigger monthly check. “It usually makes sense to take it early if you're going to … invest every bit of it,” Ramsey said in a 2019 podcast.

For example, let's say that you lose your job before reaching your FRA. You try hard to find another job but are unsuccessful in doing so. Tapping your retirement savings isn't enough to make ends meet. In such a scenario, filing for Social Security early could be your best option.

For Social Security purposes, full or normal retirement age typically means age 66 or 67, depending on when you were born. Early retirement for you could mean retiring at 62 but it could also mean retiring at 40 if you're interested in the FIRE movement.

Deadlines, long hours, and workplace conflicts can all contribute to physical and mental stress. The earlier you retire, the better it may be for your overall health. Research suggests that retiring earlier in life can help you stay healthier for longer.

Retiring early also means managing healthcare costs for the long haul. Remember, if you retire before age 65, you may need to have more saved to cover medical expenses in the years before you can apply for Medicare. You'll need to pay for healthcare coverage during that time and beyond.

As we have discussed, you are eligible to start claiming your benefit when you turn 62. But the benefit you receive at 62 will be permanently lower than if you wait. Every month past age 62 you don't claim your benefit entitles you to a slightly larger payout when you do start collecting your benefit.

When it might make sense to take Social Security at 62. You need the money now. You have health issues that may shorten your life expectancy, or you don't expect to live past your break-even point. You're receiving early retirement from an employer and the benefits end at age 62.

62 Years Old

The average monthly payment of $1,782 drops by 30% during the first month of eligibility to $1,247.40.

There is a special rule that applies to earnings for 1 year, usually the first year of retirement. Under this rule, you can get a full Social Security benefit for any whole month you are retired and earnings are below the monthly limit.

At what age is Social Security no longer taxed? ›

Social Security can potentially be subject to tax regardless of your age. While you may have heard at some point that Social Security is no longer taxable after 70 or some other age, this isn't the case. In reality, Social Security is taxed at any age if your income exceeds a certain level.

The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and take that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.

If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase. If you start receiving benefits early, your benefits are reduced a small percent for each month before your full retirement age.

The 1983 overhaul of Social Security gradually raised the age to 67, which it reached in 2022 for those born in 1960 or later — effectively cutting benefits by 13 percent as compared to benefits if the retirement age had remained at 65.

'It's probably best to retire at the start of the tax year for most people,' says Sean McCann, chartered financial planner at NFU Mutual.

December 31. As above, December 31 has the benefit of a full month of income with the pension starting the next day. This is a common date for federal employees, who are the kings and queens of gaming the retirement system. Retiring on December 31 is likely to maximize your unpaid annual leave check.

"If you live to be older than the break-even age for having waited, you will have lost out on the higher payout you would have received by waiting. However, you simply cannot predict how long you will live, so we advise taking Social Security as soon as you stop working."