What Early Retirement Means for Your Social Security Benefits

Retiring Early Means Your Benefits Will Be Impacted

Older Man deciding if he should retire or not
Photo: Oleksiy Maksymenko / Getty Images

Early retirees can miss out on thousands of dollars in Social Security benefits, because they don't know or understand the rules. There are four important things you should know about how early retirement can affect your Social Security benefits. 

Key Takeaways

  • If you retire early, you could be missing out on thousands of dollars in Social Security benefits, so be sure you understand how it works.
  • Social Security benefits are calculated based on your highest 35 years of work history, indexed for inflation.
  • You can always retire early and still wait to begin your Social Security benefits.
  • Don't forget that pension benefits and part-time work can lower the impact of the amount of money you're bringing in.

Early Retirement and Social Security

The estimates you see on your Social Security statement are based on working until that stated age. For example, if your Social Security statement says you will get $1,100 a month at age 62, that estimate assumes you'll work until you turn 62.

The amount of benefits that your statement says you will get at age 66 or 67 assumes that you will work until your 66th or 67th birthday. This means that if you take early retirement, your benefits are likely to be less than what you see on your statement.

Social Security benefits are calculated based on your highest 35 years of work history, with the highest 35 determined after each year of work has been indexed for inflation. If you take early retirement, and you do not have a full 35 years of work history, your Social Security benefits may be lower than if you were to continue to work for a longer time period.


If you didn't work 35 years, Social Security will add zeros for each year you didn't work. All of those zeros will bring down your average and reduce the size of your check.

Even if you retire early, be careful about taking your Social Security benefits at age 62 without doing an analysis first. In many cases, it is better to find other sources of funds to finance your early retirement so you can delay the start of your Social Security benefits. That can help protect you from running out of money later in life.

Retire Now, Claim Later?

You can always take early retirement and still wait to begin your Social Security benefits. That is a particularly important strategy for married couples who want to make sure the surviving spouse gets a larger benefit later in life.

The highest monthly benefit between you and your spouse is what will become the survivor benefit amount when one of you passes—at that point, you'll only get that higher benefit amount, not both amounts.

For the purpose of maximizing your future survivor benefit, you may want to plan for the higher earner between the two of you to delay the start of benefits to age 70 if possible. The lower earner, however, may want to start their benefits at an earlier age.

Pension Benefits Can Lower Earnings

Some pension plans offer a larger initial monthly benefit when you take early retirement; the pension benefit then automatically goes down when you become eligible to draw on Social Security. If you are not aware of this, you may think you will get your full pension benefit plus Social Security.

Not all pensions work this way, so attend all classes or seminars offered by your employer to make sure you fully understand your pension and health benefits prior to taking early retirement. Ask plenty of questions, and set up a one-on-one appointment with a benefits advisor or HR (human resources) person if you can.

If you worked in education or for the state or a government entity, be aware when you do begin your Social Security benefits that they may be less than what your statement shows, due to something called the "windfall elimination provision" or the "government pension offset."

For example, suppose your neighbor Lois worked as a teacher for 43 years, and in retirement she expects to get her pension plus $1,300 per month in Social Security. She will be shocked when she learns that her Social Security will be less than $300 per month due to the government pension offset that applies if she gets a pension for years of work where she was not covered under the Social Security system.

Part-Time Work May Reduce Pay

If you plan on working part-time during early retirement, you may find your Social Security benefits reduced. The reduction is based on something called the "Social Security earnings limit," and it only applies if you have not yet reached full retirement age. If your income is higher than the earnings limit, your benefits will be reduced.


In 2021, you will lose $1 for every $2 you earn if you make more than $18,960. Once you reach the year of your full retirement age, you can make up to $50,520. Social Security will then take $1 for every $3 you make.

This reduction only applies until you reach your full retirement age, which is age 66 or 67 for most people—but do not worry, those social security benefits are not lost forever. Once you reach full retirement age, your benefit will increase to account for the amount withheld earlier, and you can then earn any amount, and your benefits will not be reduced.

Frequently Asked Questions (FAQs)

What is the penalty for taking Social Security payments early?

For those born in 1960 or later, the benefit amount shrinks by 30% when they start taking benefits at age 62. Spousal benefits shrink by 35%. The penalty is less severe for older Americans. Those born before 1955 will see a 25% reduction (30% for spousal benefits).

When does it make sense to start taking Social Security payments early?

Despite the consequences, taking early Social Security payments can make sense in certain situations. For example, if you need the money, or if you're facing a serious illness, then it might make sense to start tapping your Social Security benefits.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Social Security Administration. "Social Security Benefit Amounts."

  2. Social Security Administration. "Your Retirement Age and When You Stop Working."

  3. Social Security Administration. "Survivors Benefit Amount."

  4. Social Security Administration. "Retirement Benefits—Information for Government Employees."

  5. Social Security Administration. "Retirement Benefits—Receiving Benefits While Working."

  6. Social Security Administration. "Starting Your Retirement Benefits Early."

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