Many people seek retirement at an early age, even though it can hamper their Social Security Benefits. For one thing, leaving the working at an early age may limit the amount of money you may put into your IRA or 401(k). It could also entail figuring out what you’ll do for health insurance if you’re not yet eligible for Medicare, reports YAKTRINEWS.
However, there is a less evident disadvantage to early retirement that many seniors overlook until it is too late. And you may be left with a lot less money from Social Security benefits for the rest of your life.
Your Social Security payment in retirement will be determined by your earnings throughout your 35 highest-paid years of employment. If you do not even work for the full 35 years, your benefit figure will be reduced by $0 for each year you don’t have earnings on file.
So, let us just say you retire at such an age so that you have at least a 30-year employment record left. Or else, your Social Security payment might be less hefty than you’d want.
Remember that Social Security is meant to provide you with a monthly payment for the rest of your life. You wouldn’t have to stress over your Social Security benefits running out, unlike your savings, which you may potentially drain throughout your lifetime. As a result, locking in a lesser monthly benefit is a risky move that could end up costing you a lot of money later in life.
Look For Career Switching Before Retirement
A few individuals retire early because they’ve become stressed out at work and can’t bear the thought of working for another five to ten years or longer. If that’s what’s prompting your decision to walk away early, switching careers might be a better option.
You might not despise your job as much if you switch to a less demanding field. Even if you have to take a pay reduction, having some money flowing in for a few long years is preferable to having none. You’ll avoid needing to dip into your savings too soon, and you’ll be able to include a few more years of earnings into your Social Security payout computation.
Drastically cutting to part-time work is also another option to consider. You may enjoy what you do, but it’s also incredibly demanding. If you’re in your late 50s or early 60s and can’t bear the thought of working 50+ hour weeks, consider going part-time.
After 35 years of service, many people are allowed to retire early. If that isn’t the case, you should be cautious about leaving the workforce at an early age. You can end up with a lesser Social Security payment and more financial pressure later in life if you do this.