Electing Early Social Security Retirement Benefits – Part 3

How to do it

Decide whether you want to retire early by weighing your options.

Although for some people, the financial advantage of retiring early will outweigh other concerns, you should carefully consider all aspects of retirement before deciding to retire early. Consider the following questions:

• Will your lifetime benefit be higher if you retire early or you retire at normal retirement age?

• Can you wait to receive benefits, or will you need retirement income as soon as you retire?

• Are you emotionally ready to retire?

• Do you anticipate going back to work after you retire?

• How will your early retirement affect your family? Will their Social Security benefits be affected? Will your benefits be

subject to the family maximum?

• How will you pay for medical insurance coverage until age 65 (when you become eligible for Medicare)?

You can estimate your retirement benefit online using the Retirement Estimator calculator on the Social Security website (www.ssa.gov). You can create different scenarios based on current law that will illustrate how different earnings amounts and retirement ages will affect the benefit you receive.

Fill out an application with the SSA

If you are eligible for retirement benefits and want to retire early, fill out a benefit application three months before your 62nd birthday (or before your retirement date, if later). To apply for Social Security benefits, you can fill out an application on the SSA website, or call or visit your local Social Security office. You can also call the SSA at (800)772-1213 to discuss your options or get more information about the application process.

Tax considerations

If you retire early, will your benefits be taxed differently?

Social Security retirement benefits received at any age are not taxed if your total income (modified adjusted gross income) plus one half of your Social Security is $32,000 or less if you file a joint tax return or $25,000 or less if you file a single tax return. If your total income plus one half of your Social Security exceeds this amount, then up to 85 percent of your Social Security benefit may be taxed, depending on the circumstances. If you think that your earnings prior to normal retirement age will make your Social Security benefits taxable, you can either try to reduce your earned income or consider retiring later (if doing so would lessen your tax liability).

Tip: Special rules may apply if you file as married filing separately and you lived with your spouse at any time during the year.

Questions & Answers

If your company is downsizing and you are close to age 62, should you apply for early retirement benefits or look for another job?

Retiring early may be the right decision for you, but don’t decide hastily. Take time to consider both your personal needs and your financial ones. If you weren’t being laid off, would you retire early anyway? If the answer to this question is yes, then early retirement might be right for you. If the answer is no or if you’re not sure, consider other options. If your employer is giving you severance pay, you might have enough income to be able to postpone retirement past age 62. For every month you postpone retirement, your monthly benefit will increase. You might also be eligible for unemployment benefits that will enable you to postpone retirement.

Article courtesy of Forefield.Securities offered through NPB Financial Group, LLC. A Registered Investment Advisor/Broker-Dealer Member FINRA, MSRB, and SIPC