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Social Security Mailbox

Will a Layoff Reduce My Benefits?

Here's how the calculation works

Q. I will be 60 years old in July and plan to collect my Social Security at age 62. I was recently laid off from my job where I was earning $55,000 a year. If I make less money during the next two years, will that affect the amount of money I can collect from Social Security at age 62?

See also: Top 25 Social Security questions.

A. Losing two years of substantial earnings immediately before you apply for Social Security could reduce your monthly retirement benefits — or have no impact at all — depending on your earnings history. Benefit payments are tied to average lifetime earnings over the 35 years in which you earned the most.

Social Security can tell you how your benefits at age 62 will be affected by two recent years of zero earnings. To get an estimate of your retirement benefits, call Social Security at 1-800-772-1213 and ask the representative to figure it out for you. Or, you can get the information by using Social Security's online Retirement Estimator.

Whatever the reduction in benefits because of your job loss, that will be only one of your problems if you take your benefits at age 62. People who start their benefits at that age are stuck with a permanent reduction in their monthly payments.

Next: Approaching retirement? Make sure to create a budget.  >>

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