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Social Security Mailbox

Impact of Early Retirement

Taking Social Security benefits early typically lowers levels for life

Q. If I take reduced benefits at age 62, will I move up to full benefits when I reach full retirement age at 66?

A. You won't. This is one of the biggest misconceptions about how Social Security works and can lead to some very unpleasant surprises after you start to get benefits.

Think of your total lifetime benefit as a pot of money. Social Security gives you a choice as to when to start receiving the money from the pot in the form of monthly checks.

If you take your benefits at 62, the earliest age, you will get a series of relatively small payments for the rest of your life. If you wait until, say, 64 or 65 to apply, you will get somewhat larger monthly lifetime benefits but for a smaller number of years.

If you wait until 66, your full retirement age, your flow will be larger still. And after 66, you'll get an 8 percent bonus for each year you continue to wait, up until age 70. At that age, you'll get the largest monthly checks, but for the shortest period of time.

Social Security tries to set its payment schedules so that, on average, no matter what age you begin at, over the course of your lifetime you'll collect the same total amount — your pot of money.

So you won't get an automatic boost at age 66. But one possible way to increase your benefit is to go back to work. Any work you do will become part of the work record that determines the size of your benefit. If your annual income in any of these new work years turns out to be higher than any of the years by which your original benefit was calculated, you could get a bump upward.

And if between 62 and 66, you exceed certain earning limits, some or all of your check will be held back, but Social Security will increase your benefit at 66 to give you back the money that you weren't paid. After 66, you can earn however much you can without losing benefits.

For more information, see: Starting Benefits at Different Ages Will Change Your Amount.

Stan Hinden, a former columnist for The Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question for the Social Security Mailbox? Check out the archive. If you don't find your answer there, send a query.

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Social Security expert Jonathan Peterson talks about his new book Social Security for Dummies.

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