November 24


When Should I Retire?

By Mac McLean

November 24, 2020

You’re probably wondering, when should I retire? Everybody has something they’d like to do when they stop working: A vacation they’d like to plan, a project they’d like to get started, or some grandchildren who could use their attention.

Well, the Social Security Administration has three dates for you to consider: your 62nd birthday, the year following your 66th birthday, and your 70th birthday. Each of these milestones – whenever they might be — marks a key moment in determining how much money you’ll receive from Social Security’s retirement benefits program each month.

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And since these payments can replace anywhere from 27 percent to 75 percent of your pre-retirement earnings when you stop working, they’re definitely something you should consider when planning your financial future. Sign up for a free financial planning workshop that will help you learn more about how Social Security fits into your retirement picture.

When should I retire?

The Social Security Administration calculates your primary insurance amount, which is also known as the basic benefit amount by reviewing your earnings history over the past 35 years.This is the amount of money you can expect to receive each month if you start collecting retirement benefits at your full retirement age, which varies depending on when you were born. If you claim your benefits before your full retirement age, you will earn a fraction of your basic benefit amount. And if you claim your benefits after your full retirement age, you will make more.

  • Full retirement age — If you were born before 1954, you’ve already reached your full retirement age of 66 or will have reached your full retirement age by the end of this year. This means you’re eligible to receive your full basic benefit amount when you sign up for benefits. People who were born between 1955 and 1959 will have to wait a couple of months after their 66th birthday to earn their basic benefit amount – here’s a handy chart to help you out – while those who were born after 1960 will have to wait until their 67th birthday to collect their full basic benefit amount.
  • Early retirement – But you don’t have to wait until your 66th or 67th birthday to start collecting Social Security retirement benefits. That’s because the program offers an early retirement option where you could file for benefits at any time between your 62nd birthday and your full retirement age if you’re willing to accept a reduced benefit amount. The exact amount you’ll earn depends on the number of months between the day you sign up for your retirement benefits and the day you would reach your full retirement age. A person born after 1960 would only earn 70 percent of their basic benefit amount if they signed up for benefits at age 62. They would earn 80 percent of their basic benefit amount if they signed up at age 64. They would earn 93.3 percent of their basic benefit amount if they signed up for benefits at age 65. It’s also important to note every year you don’t work is one year less of income used to calculate your basic benefit amount. This can make a huge difference in your overall retirement picture if you expect your earnings to continue increasing the longer you work. The advantage, though, is that every year you don’t work is one more year when you can enjoy your retirement.
  • Delayed retirement – People can also delay their retirement – when they start collecting their Social Security benefits – in exchange for a higher monthly payment. The Social Security Administration will increase your basic benefit amount by 8 percent for every year after your full retirement age you delay your benefits until your 70th birthday. If you were born after 1960, you’d get 108 percent of your basic benefit amount if you file for benefits after your 68th birthday, 116 percent if you file after your 69th birthday, and 124 percent of your basic benefit amount if you file on your 70th birthday. This can make a massive difference if you haven’t saved a lot of money for your retirement and will be relying on Social Security for most of your post-retirement income. Of course, the drawback is that every year you continue working is one more year of job-related stress and one more year where you could get hurt on the job. Either situation could impact your overall health when you do retire and your ability to enjoy your post-retirement plans.

Regardless of when you choose to retire, though, there is one date that you need to keep in mind: The day when you turn 64 years and 9 months old. That’s when you should sign up for Medicare, which will go a long way toward paying your health care costs whether you are working or not.

And, don’t forget to sign up for a free financial planning workshop so you can learn more about how Social Security fits into your retirement picture. These events will also connect you with a certified financial planner who can help you review your financial situation and figure out when you should retire.

Mac McLean

About the author

Based out of Bend, Oregon, Mac McLean is a freelance writer who covers older adults and the issues affecting their daily lives. He currently writes for this website, the AARP Bulletin, and Waste Alert. He and his wife are riding out the pandemic with their 12-year-old English Springer Spaniel mix in a 200-square-foot guest house on a 2.2-acre farm surrounded by chickens, cows, pigs, and a donkey that simply will not shut up.

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