August 12, 2025 • 17 mins
Thinking about retiring early and worried it might hurt your Social Security benefits? Good news: it probably won’t.
A common myth is that you have to work into your 60s to get the most out of Social Security. In reality, benefits are based on your 35 highest-earning years—not the age you stop working.
This episode breaks down how benefits are calculated, what “bend points” are, and why even part-time income in semi-retirement can make a difference.
There’s also an important distinction between when you stop working and when you start claiming. Monthly benefits can range from around $1,400 at age 62 to $2,400 at age 70, depending on the timing.
Curious what your own numbers look like? Head to ssa.gov to create a free account and check your personalized estimate. It’s a simple step that can help you make smarter retirement decisions.
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Episode Transcript
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Speaker 1 (00:00):
I don't care how big your portfolio is.
The decision of when youcollect Social Security is going
to be one of the most importantdecisions you make with your
retirement.
That being said, what happensto that Social Security benefit
if you retire early?
That's exactly what we're goingto discuss today.
Aaron, today we're talkingabout Social Security, and all
of us more or less know thatSocial Security is going to be a
core part of our income when weretire.
(00:21):
What we don't always know iswhat happens to that if we
retire early.
In other words, do we have tokeep working until 62 or 67 or
70 to maximize what we're doing?
And that's what we're going totalk about today.
Speaker 2 (00:33):
Yeah, I think you know, looking at social security
, it is the backbone for thevast majority of people's
retirements and I think one ofthe biggest questions you can
ask yourself and answercorrectly hopefully is when
should I claim?
And so many people want to stepaway from the workforce, maybe
in their late 50s or their early60s, and the earliest you can
(00:54):
claim Social Security is 62.
There are some consequenceswith that Maybe good, maybe bad.
It really just depends oncircumstance.
Speaker 1 (01:02):
So with that, the earliest you can collect is 62.
Does that mean that I have towork until age 62 in order to
maximize what I would get at age62?
Speaker 2 (01:09):
Absolutely not.
That's when most people areeligible.
I mean, if you have adisability, we have some
exceptions here, but if youclaim early at 62, you receive a
reduced benefit from what wouldotherwise be your benefit at
what the government considersfull retirement age, which is
generally entering its waytowards 67 right now.
For retirees in 2025, it's 66and 10 months, I believe.
(01:35):
Is that the proper retirementage right now?
Speaker 1 (01:40):
And working its way up to 67, yes, depending on your
birth year, and I think thatwhat's really important for
people to know probably is howis social security actually
calculated?
Speaker 2 (01:47):
Yeah.
Speaker 1 (01:48):
And what some people don't realize.
It has nothing to do with howlong you work.
It has everything to do withhow many years you worked and
how much you earned during thoseyears that you were working.
So what does that look like?
How many years do you have towork, and what does social
security do in each year todetermine what goes into the
Social Security formula?
Speaker 2 (02:08):
Yeah, I think the biggest thing to take away is
that Social Security only looksat your highest 35 earning years
and I think one of the reallyreally important things to look
at is you know, if we look atour income when we were 20 or
when we were 30, it was probablysignificantly less than we were
(02:29):
, than it was when we were inour 50s or our 60s.
And I think some people getconcerned and think, oh, I have
to keep working to get thesehigher earning years in there.
But I think some people forgetthat there's an inflation
adjusted element to this.
Could you speak to what thatinflation adjustment looks like?
Speaker 1 (02:49):
Yes, you have something called your average
index monthly earnings.
And so, like you're saying,aaron, when you worked as a
20-year-old and that was 40years ago you probably weren't
making even what a 20-year-oldtoday would be making, and
that's simply due to inflation.
And so what Social Security isdoing is they're saying there's
a formula and that's simply dueto inflation.
And so what Social Security isdoing is they're saying there's
a formula and this formula isgoing to look at the 35 highest
years of earnings, of averageindex monthly earnings that you
(03:09):
earned, and we don't care if youearn those when you were 60,
when you were 20, when you were40, when you were 16.
We're just looking at thoseearnings and we're going to
adjust them for inflation eachyear.
And so what they're doing isthey're taking that and they're
taking that formula to saywhatever that looks like.
There's all sorts of thingscalled bend points and how much
does every dollar that you earnactually impact the benefit that
(03:31):
you're going to get?
But it's those top 35 years ofearnings.
I'm leaving money on the tableof social security if I do so,
and you might be, but it againdoesn't have anything to do with
the year that you retire iseverything to do with.
Have you already paid in tosocial security for 35 years and
(03:53):
what was the amount of that?
Because, hypothetically, ifsomeone started working at age
20 and let's say that's reallystrong income From the time they
started working, for the next35 years, by the time that
they're 55, they're done working.
Yeah Well, their social securitybenefits are fully maximized.
It doesn't matter if they keepworking from 56 and beyond,
(04:13):
earning a million dollars a year, if they've maximized their
social security contributionsevery single year on an
inflation-adjusted basis.
So again, this every year isadjusted for inflation.
Continuing to work is notactually helping their social
security, but their benefitsalready maxed.
Once it's maxed, it's maxed.
You can't do anything toincrease that benefit other than
(04:33):
waiting longer to take it, inwhich case the benefit just goes
up from there.
But that's the most importantthing to note.
Is there's maybe this myth orthis misconception that if I
stop working at 55 or if I stopworking at 60, my social
security benefits going tosuffer?
Do you hear?
Speaker 2 (04:53):
that when you talk to people, do you see that that
concern?
All the time I think there'skind of this misconception that
if I retire at 58, even if Ihaven't yet claimed social
security, my benefit is somehowgoing to be penalized because
it's only looking at, say, mylast 35 years, and that's just
not true.
It's looking at your highestearning 35 years, whenever they
happened.
(05:13):
And I always like to remindpeople that that inflation
adjustment stops for yourworking income after the age of
60.
So it's very real that maybeyour earnings at the age of 59
are more impactful for yoursocial security than they are at
61.
Because let's say we takeinflation or I guess not
inflation let's take raises outof the equation and let's say
(05:35):
somebody is making $100,000 ayear.
If they're making $100,000 atthe age of 59, once we go to
claim social security that getsa bump up due to inflation.
If you're making $100,000 atthe age of 61, if you have other
higher years that are inflationadjusted higher, that year for
(05:56):
your 61 year is not going tofactor in because that does not
get an inflation adjustment.
Speaker 1 (06:02):
And the reason and the way this works for people
listening is this year, forexample.
And the reason and the way thisworks for people listening is
this year, for example, you paySocial Security taxes on the
first hundred and seventy sixthousand one hundred dollars you
earn.
So if you earn above that,you're not paying in any more
Social Security tax.
Now the amount that you aregetting credited to what's
called your primary insuranceamount is also capped.
(06:23):
So no more taxes in, but nomore increase to your benefit,
and the way that works is ofthat hundred and seventy six.
You might know the exactnumbers, aaron.
I forget them off the top of myhead, but it's the first.
There's two bend points.
And then the first bend pointsays the first monthly earnings
up to like 1200 to 1300,.
I want to say, off the top ofmy head, 90% of every dollar
(06:44):
that you earn up to that amounton a monthly basis is
contributed to the formula thatdetermines how much you're going
to get.
The second bend point is what?
30%, 33% 35%, I believe 35% iscontributed to it and then above
that is, I think, 15%,something around there.
So it's one of these thingsthat it's like a reverse
progressive scale where the moreyou earn you're still paying
(07:08):
the same social security tax, upto a cap, but the less it's
actually increasing the benefitthat you're going to get.
And the reason for that is tosay that the lower income
workers, all else being equal,your Social Security benefit
will be a higher percentage ofwhat you earned than it would
have been for someone who wasn't, someone who wasn't.
(07:29):
But for planning purposes,where this also comes into play
is, say, you are wanting toretire at 55 and you have 30
years of earnings.
You work from 25 to 55.
If you completely stop working,it's zeros across the board.
So social security is stillgoing to take your 35 highest
years.
But they're going to say youactually have 30 years of
earnings and we're going to lookat your average index monthly
earnings.
You don't have any other year,so we're just going to use zeros
(07:50):
for those other five years toget the full 35, to run the
formula to give you the amountyour primary insurance amount
that you could receive at yourfull retirement age.
This pinpoint, thisunderstanding of how binpoints
works is so important, becausemaybe it's not retirement you
want.
You just don't want to beworking 60 hours a week anymore.
Speaker 2 (08:08):
Yeah.
Speaker 1 (08:08):
You don't want to be having that same high stress job
.
Well, do you go, take adifferent job that even you earn
just a small amount, a couplethousand bucks a month, and you
look at that and you say that'snot going to dramatically
increase my social securitybenefit?
Maybe not dramatically, but itwill have an impact, because
those, those First dollars thatyou're making, are weighed most
heavily in terms of how socialsecurity is going to be
(08:30):
calculated.
So this is where it ties verymuch back to the financial plan
of what are you actually tryingto do?
Is it actually be done workingand never go again, or is it?
Are you trying to escape fromthat high stress, high pressure
job, the boss you don't care for?
Is there an alternative thatstill allows you to keep
building your benefit, but notat the cost of sacrificing
everything else?
Speaker 2 (08:50):
And absolutely those modest income, the cost of
sacrificing everything else andabsolutely those modest income
increases.
Just eliminating the zeros, ifthat's something you want to do,
as you said, can go a long way.
Making $20,000 a year, $30,000 ayear and I always like to think
of it from the perspective ofthe entire household, because
it's not just that you'reincreasing your benefit.
If you had a stay-at-homespouse or a spouse who didn't
(09:31):
have an income that allowed themto create a substantial social
security benefit for themselvesand more stability for the
household, if we tackle thisfrom a holistic picture and we
say, okay, how can I maximize mybenefit, even if it's just that
incremental amount?
So is it worth your sanity togo back to work part-time and
increase it a couple hundreddollars?
Maybe the answer is yes, maybethe answer is no, but you kind
of have to look at yourhousehold and where your benefit
(09:52):
currently stands.
And I always tell people go tossagov, one of the best
government websites or the bestgovernment website out there,
because you can actually seewhat your benefit is going to be
.
So many people don't even havean idea of what their benefit's
going to be.
Speaker 1 (10:06):
Yeah, speaking of ssagov and social security,
obviously a lot of governmentprograms have a bad it's.
Every program is always likethe DMV.
Why don't?
I've actually been pleasantlysurprised in hearing stories
from clients who have the.
They are very helpful If youget a social security rep on the
phone.
This isn't a hundred percent ofthe time, but it was striking.
It was a very surprisingexperience.
(10:26):
A lot of people had that.
It was very easy.
It was very helpful, actuallyhelped them to work through this
stuff and find what they needed.
Let's do this now.
Erin, there's a differencebetween how many years you work
and when you actually collectsocial security.
Both of those are going to havean impact on what will your
actual benefit be when it comestime to collect.
So if I work a certain numberof years, does that impact when
(10:50):
I have to collect my benefit orwhen I'm going to be forced to
collect my benefit?
Speaker 2 (10:54):
Once you have your work history there it kind of
comes down to when do you wantto generate an income stream for
your household?
Now I think of Social Securityas a longevity insurance,
because when you decide to claimbasically creates your income
floor in retirement.
The earlier you claim, you'regoing to get an income sooner,
but it's going to be lower.
(11:15):
So if you claim at 62, as wesaid earlier in the video you
get a benefit that is about 70%of what it otherwise would have
been at full retirement age.
But the trade-off is you get anincome sooner, so you're going
to get an income throughout alonger duration of your life.
If you delay, you're going tobe heavily relying on
investments if you've steppedaway from the workforce, so
(11:36):
you're going to have to makesure to build up a more robust
investment portfolio.
But the trade-off here is thatyou get a higher monthly benefit
later on.
Now you can delay all the wayto full retirement age.
You can delay all the way up to70.
And the benefits do increasesubstantially.
You know, going from a 70%benefit that you would have
otherwise had at say, say, ifyou had a $2,000 benefit at the
(11:57):
age of 67.
I know this one just becausethis is the average monthly
social security check.
And if you claim early, foreasy math at the age of 62, 70%
of that is about $1,400 a month.
Now if you decide to delay tothe latest claiming age of 70,
that benefit's going to increaseto about $2,400 a month.
So there can be a pretty largedisparity between when you claim
(12:20):
as far as early or late.
As far as what your income wouldbe, Do you want your income
floor to be $1,400 a month?
Do you want it to be $2,000 amonth?
For full retirement age, Do youwant it to be $2,400 a month?
I think there are trade-offsfor all of them.
I don't think there's a rightanswer.
I don't think the answer isalways claim early, wait until
full retirement age or delay.
(12:42):
I think it's about looking atwhat your portfolio can generate
.
How much pressure do you wantto put on your portfolio in
those early years and how muchguaranteed income stream do you
want later in your retirement,when you're 80, when you're 90?
What do you want yourguaranteed income streams to
look like and how much of thebrute force of your retirement
(13:04):
do you want your investments tocarry?
Speaker 1 (13:08):
Yes, lots of considerations, exactly what
you're saying.
How long do you think you'regoing to live?
Obviously, we don't have anyidea.
But what's health history like?
What's family history like?
Spousal decisions, what do youwant the implications to be if
you're married?
For a spousal benefit, for apotential survivor benefit?
How do you de-risk what you'retrying to do versus how do you
maximize the income that you'repotentially looking for?
(13:28):
So social security seems likethis fairly simple thing, but
there are so many implicationsthat tie into everything the way
you invest, the tax strategiesthat you do or don't employ, the
way that you protect yourself,your spouse, your family
Everything is seemingly touchedby the decision you make around
social security.
One final thing, maybe a coupleof final things there, and I
(13:49):
think it's important to so manypeople if they are going to
retire early, they have astatement and that Social
Security statement says you know, I'm James, I'm 60.
Here's what Social Securitysays I'm going to get.
I want to retire right now, sayI'm 60.
Okay, but my statement saysthat it's assuming.
Here's what my benefit would beif I continue to earn what I've
(14:09):
been earning up until now.
How do I think about that, andis that going to change if I
were to stop working at the ageof 60?
Speaker 2 (14:17):
Well, to go over how you phrased it earlier, kind of
depends If you already have your35 highest earning years or you
have 35 years under your belt.
If those were your highestearning years, it really doesn't
matter, it's not going tochange a darn thing.
If you otherwise would have hadhigher earning years, that
would replace zeros, it wouldmarginally increase your benefit
(14:39):
and that might be factored intothe statement.
If those would be higherearning years, If it would be
lower earning years, then yourbenefit might reduce a little
bit.
So I mean, in two years timeyour benefit is not going to
change drastically, Even ifwe're talking about lopping off
zeros.
It might change by 50 or $100 amonth.
(14:59):
But I mean we're not going tosee these huge, dramatic shifts.
And people just have to knowthat you can stop working at the
age of 58 or 60.
You can wait to claim until theage of 62.
As long as you have your 35highest earning years, your
benefit's going to be there.
Speaker 1 (15:18):
Yes.
So the benefit's going to bedriven by a couple of things.
One is the average indexmonthly earnings and the number
of those that you have, so yourhighest 35 years and how much
were you actually paying in eachyear?
And then, second is when do youactually decide to collect?
Any time between 62 and 70?
Those decisions are notnecessarily commingled, meaning
(15:41):
the way you decide one does notimpact the other.
You could stop working at 40and still fully collect social
security at 70.
You could work until 70 andcollect social security at 62.
Now, probably not wanting to doso if your income's over a
certain amount because there'searnings limits and all that.
But they are two veryindependent decisions.
But those are the two decisionsthat are going to be the
(16:03):
driving force behind how muchwill you actually receive with
your social security benefit,erin, anything else you want to
add before we start to wrap up?
Speaker 2 (16:10):
I love how you phrased it as a two-prong
approach for Social Security.
Make sure you look at it fromthe stance of how many working
years do you have?
How long do you want to delay?
Do you want to claim early fullretirement age or delayed?
I think my biggest two cents Iwant to put out there is social
security is probably one of thebiggest, if not the biggest,
(16:31):
retirement income decisionyou're going to make.
So just don't throw it at adartboard and choose an age
randomly.
Choose an age that works foryou and any age can be great,
but just make sure it fitswithin your financial plan, yeah
.
Speaker 1 (16:46):
It's a big decision, lots of implications.
Hopefully this episode helpedto clarify some of the things
that decision hinges upon.
Speaker 2 (16:55):
So, Erin this is great and we will see you all
next time.
Sounds good.
Bye, guys, thank you.
I don't care how big your portfolio is.
The decision of when youcollect Social Security is going
to be one of the most importantdecisions you make with your
retirement.
That being said, what happensto that Social Security benefit
if you retire early?
That's exactly what we're goingto discuss today.
Aaron, today we're talkingabout Social Security, and all
of us more or less know thatSocial Security is going to be a
core part of our income when weretire.
(00:21):
What we don't always know iswhat happens to that if we
retire early.
In other words, do we have tokeep working until 62 or 67 or
70 to maximize what we're doing?
And that's what we're going totalk about today.
Speaker 2 (00:33):
Yeah, I think you know, looking at social security
, it is the backbone for thevast majority of people's
retirements and I think one ofthe biggest questions you can
ask yourself and answercorrectly hopefully is when
should I claim?
And so many people want to stepaway from the workforce, maybe
in their late 50s or their early60s, and the earliest you can
(00:54):
claim Social Security is 62.
There are some consequenceswith that Maybe good, maybe bad.
It really just depends oncircumstance.
Speaker 1 (01:02):
So with that, the earliest you can collect is 62.
Does that mean that I have towork until age 62 in order to
maximize what I would get at age62?
Speaker 2 (01:09):
Absolutely not.
That's when most people areeligible.
I mean, if you have adisability, we have some
exceptions here, but if youclaim early at 62, you receive a
reduced benefit from what wouldotherwise be your benefit at
what the government considersfull retirement age, which is
generally entering its waytowards 67 right now.
For retirees in 2025, it's 66and 10 months, I believe.
(01:35):
Is that the proper retirementage right now?
Speaker 1 (01:40):
And working its way up to 67, yes, depending on your
birth year, and I think thatwhat's really important for
people to know probably is howis social security actually
calculated?
Speaker 2 (01:47):
Yeah.
Speaker 1 (01:48):
And what some people don't realize.
It has nothing to do with howlong you work.
It has everything to do withhow many years you worked and
how much you earned during thoseyears that you were working.
So what does that look like?
How many years do you have towork, and what does social
security do in each year todetermine what goes into the
Social Security formula?
Speaker 2 (02:08):
Yeah, I think the biggest thing to take away is
that Social Security only looksat your highest 35 earning years
and I think one of the reallyreally important things to look
at is you know, if we look atour income when we were 20 or
when we were 30, it was probablysignificantly less than we were
(02:29):
, than it was when we were inour 50s or our 60s.
And I think some people getconcerned and think, oh, I have
to keep working to get thesehigher earning years in there.
But I think some people forgetthat there's an inflation
adjusted element to this.
Could you speak to what thatinflation adjustment looks like?
Speaker 1 (02:49):
Yes, you have something called your average
index monthly earnings.
And so, like you're saying,aaron, when you worked as a
20-year-old and that was 40years ago you probably weren't
making even what a 20-year-oldtoday would be making, and
that's simply due to inflation.
And so what Social Security isdoing is they're saying there's
a formula and that's simply dueto inflation.
And so what Social Security isdoing is they're saying there's
a formula and this formula isgoing to look at the 35 highest
years of earnings, of averageindex monthly earnings that you
(03:09):
earned, and we don't care if youearn those when you were 60,
when you were 20, when you were40, when you were 16.
We're just looking at thoseearnings and we're going to
adjust them for inflation eachyear.
And so what they're doing isthey're taking that and they're
taking that formula to saywhatever that looks like.
There's all sorts of thingscalled bend points and how much
does every dollar that you earnactually impact the benefit that
(03:31):
you're going to get?
But it's those top 35 years ofearnings.
I'm leaving money on the tableof social security if I do so,
and you might be, but it againdoesn't have anything to do with
the year that you retire iseverything to do with.
Have you already paid in tosocial security for 35 years and
(03:53):
what was the amount of that?
Because, hypothetically, ifsomeone started working at age
20 and let's say that's reallystrong income From the time they
started working, for the next35 years, by the time that
they're 55, they're done working.
Yeah Well, their social securitybenefits are fully maximized.
It doesn't matter if they keepworking from 56 and beyond,
(04:13):
earning a million dollars a year, if they've maximized their
social security contributionsevery single year on an
inflation-adjusted basis.
So again, this every year isadjusted for inflation.
Continuing to work is notactually helping their social
security, but their benefitsalready maxed.
Once it's maxed, it's maxed.
You can't do anything toincrease that benefit other than
(04:33):
waiting longer to take it, inwhich case the benefit just goes
up from there.
But that's the most importantthing to note.
Is there's maybe this myth orthis misconception that if I
stop working at 55 or if I stopworking at 60, my social
security benefits going tosuffer?
Do you hear?
Speaker 2 (04:53):
that when you talk to people, do you see that that
concern?
All the time I think there'skind of this misconception that
if I retire at 58, even if Ihaven't yet claimed social
security, my benefit is somehowgoing to be penalized because
it's only looking at, say, mylast 35 years, and that's just
not true.
It's looking at your highestearning 35 years, whenever they
happened.
(05:13):
And I always like to remindpeople that that inflation
adjustment stops for yourworking income after the age of
60.
So it's very real that maybeyour earnings at the age of 59
are more impactful for yoursocial security than they are at
61.
Because let's say we takeinflation or I guess not
inflation let's take raises outof the equation and let's say
(05:35):
somebody is making $100,000 ayear.
If they're making $100,000 atthe age of 59, once we go to
claim social security that getsa bump up due to inflation.
If you're making $100,000 atthe age of 61, if you have other
higher years that are inflationadjusted higher, that year for
(05:56):
your 61 year is not going tofactor in because that does not
get an inflation adjustment.
Speaker 1 (06:02):
And the reason and the way this works for people
listening is this year, forexample.
And the reason and the way thisworks for people listening is
this year, for example, you paySocial Security taxes on the
first hundred and seventy sixthousand one hundred dollars you
earn.
So if you earn above that,you're not paying in any more
Social Security tax.
Now the amount that you aregetting credited to what's
called your primary insuranceamount is also capped.
(06:23):
So no more taxes in, but nomore increase to your benefit,
and the way that works is ofthat hundred and seventy six.
You might know the exactnumbers, aaron.
I forget them off the top of myhead, but it's the first.
There's two bend points.
And then the first bend pointsays the first monthly earnings
up to like 1200 to 1300,.
I want to say, off the top ofmy head, 90% of every dollar
(06:44):
that you earn up to that amounton a monthly basis is
contributed to the formula thatdetermines how much you're going
to get.
The second bend point is what?
30%, 33% 35%, I believe 35% iscontributed to it and then above
that is, I think, 15%,something around there.
So it's one of these thingsthat it's like a reverse
progressive scale where the moreyou earn you're still paying
(07:08):
the same social security tax, upto a cap, but the less it's
actually increasing the benefitthat you're going to get.
And the reason for that is tosay that the lower income
workers, all else being equal,your Social Security benefit
will be a higher percentage ofwhat you earned than it would
have been for someone who wasn't, someone who wasn't.
(07:29):
But for planning purposes,where this also comes into play
is, say, you are wanting toretire at 55 and you have 30
years of earnings.
You work from 25 to 55.
If you completely stop working,it's zeros across the board.
So social security is stillgoing to take your 35 highest
years.
But they're going to say youactually have 30 years of
earnings and we're going to lookat your average index monthly
earnings.
You don't have any other year,so we're just going to use zeros
(07:50):
for those other five years toget the full 35, to run the
formula to give you the amountyour primary insurance amount
that you could receive at yourfull retirement age.
This pinpoint, thisunderstanding of how binpoints
works is so important, becausemaybe it's not retirement you
want.
You just don't want to beworking 60 hours a week anymore.
Speaker 2 (08:08):
Yeah.
Speaker 1 (08:08):
You don't want to be having that same high stress job
.
Well, do you go, take adifferent job that even you earn
just a small amount, a couplethousand bucks a month, and you
look at that and you say that'snot going to dramatically
increase my social securitybenefit?
Maybe not dramatically, but itwill have an impact, because
those, those First dollars thatyou're making, are weighed most
heavily in terms of how socialsecurity is going to be
(08:30):
calculated.
So this is where it ties verymuch back to the financial plan
of what are you actually tryingto do?
Is it actually be done workingand never go again, or is it?
Are you trying to escape fromthat high stress, high pressure
job, the boss you don't care for?
Is there an alternative thatstill allows you to keep
building your benefit, but notat the cost of sacrificing
everything else?
Speaker 2 (08:50):
And absolutely those modest income, the cost of
sacrificing everything else andabsolutely those modest income
increases.
Just eliminating the zeros, ifthat's something you want to do,
as you said, can go a long way.
Making $20,000 a year, $30,000 ayear and I always like to think
of it from the perspective ofthe entire household, because
it's not just that you'reincreasing your benefit.
If you had a stay-at-homespouse or a spouse who didn't
(09:31):
have an income that allowed themto create a substantial social
security benefit for themselvesand more stability for the
household, if we tackle thisfrom a holistic picture and we
say, okay, how can I maximize mybenefit, even if it's just that
incremental amount?
So is it worth your sanity togo back to work part-time and
increase it a couple hundreddollars?
Maybe the answer is yes, maybethe answer is no, but you kind
of have to look at yourhousehold and where your benefit
(09:52):
currently stands.
And I always tell people go tossagov, one of the best
government websites or the bestgovernment website out there,
because you can actually seewhat your benefit is going to be
.
So many people don't even havean idea of what their benefit's
going to be.
Speaker 1 (10:06):
Yeah, speaking of ssagov and social security,
obviously a lot of governmentprograms have a bad it's.
Every program is always likethe DMV.
Why don't?
I've actually been pleasantlysurprised in hearing stories
from clients who have the.
They are very helpful If youget a social security rep on the
phone.
This isn't a hundred percent ofthe time, but it was striking.
It was a very surprisingexperience.
(10:26):
A lot of people had that.
It was very easy.
It was very helpful, actuallyhelped them to work through this
stuff and find what they needed.
Let's do this now.
Erin, there's a differencebetween how many years you work
and when you actually collectsocial security.
Both of those are going to havean impact on what will your
actual benefit be when it comestime to collect.
So if I work a certain numberof years, does that impact when
(10:50):
I have to collect my benefit orwhen I'm going to be forced to
collect my benefit?
Speaker 2 (10:54):
Once you have your work history there it kind of
comes down to when do you wantto generate an income stream for
your household?
Now I think of Social Securityas a longevity insurance,
because when you decide to claimbasically creates your income
floor in retirement.
The earlier you claim, you'regoing to get an income sooner,
but it's going to be lower.
(11:15):
So if you claim at 62, as wesaid earlier in the video you
get a benefit that is about 70%of what it otherwise would have
been at full retirement age.
But the trade-off is you get anincome sooner, so you're going
to get an income throughout alonger duration of your life.
If you delay, you're going tobe heavily relying on
investments if you've steppedaway from the workforce, so
(11:36):
you're going to have to makesure to build up a more robust
investment portfolio.
But the trade-off here is thatyou get a higher monthly benefit
later on.
Now you can delay all the wayto full retirement age.
You can delay all the way up to70.
And the benefits do increasesubstantially.
You know, going from a 70%benefit that you would have
otherwise had at say, say, ifyou had a $2,000 benefit at the
(11:57):
age of 67.
I know this one just becausethis is the average monthly
social security check.
And if you claim early, foreasy math at the age of 62, 70%
of that is about $1,400 a month.
Now if you decide to delay tothe latest claiming age of 70,
that benefit's going to increaseto about $2,400 a month.
So there can be a pretty largedisparity between when you claim
(12:20):
as far as early or late.
As far as what your income wouldbe, Do you want your income
floor to be $1,400 a month?
Do you want it to be $2,000 amonth?
For full retirement age, Do youwant it to be $2,400 a month?
I think there are trade-offsfor all of them.
I don't think there's a rightanswer.
I don't think the answer isalways claim early, wait until
full retirement age or delay.
(12:42):
I think it's about looking atwhat your portfolio can generate
.
How much pressure do you wantto put on your portfolio in
those early years and how muchguaranteed income stream do you
want later in your retirement,when you're 80, when you're 90?
What do you want yourguaranteed income streams to
look like and how much of thebrute force of your retirement
(13:04):
do you want your investments tocarry?
Speaker 1 (13:08):
Yes, lots of considerations, exactly what
you're saying.
How long do you think you'regoing to live?
Obviously, we don't have anyidea.
But what's health history like?
What's family history like?
Spousal decisions, what do youwant the implications to be if
you're married?
For a spousal benefit, for apotential survivor benefit?
How do you de-risk what you'retrying to do versus how do you
maximize the income that you'repotentially looking for?
(13:28):
So social security seems likethis fairly simple thing, but
there are so many implicationsthat tie into everything the way
you invest, the tax strategiesthat you do or don't employ, the
way that you protect yourself,your spouse, your family
Everything is seemingly touchedby the decision you make around
social security.
One final thing, maybe a coupleof final things there, and I
(13:49):
think it's important to so manypeople if they are going to
retire early, they have astatement and that Social
Security statement says you know, I'm James, I'm 60.
Here's what Social Securitysays I'm going to get.
I want to retire right now, sayI'm 60.
Okay, but my statement saysthat it's assuming.
Here's what my benefit would beif I continue to earn what I've
(14:09):
been earning up until now.
How do I think about that, andis that going to change if I
were to stop working at the ageof 60?
Speaker 2 (14:17):
Well, to go over how you phrased it earlier, kind of
depends If you already have your35 highest earning years or you
have 35 years under your belt.
If those were your highestearning years, it really doesn't
matter, it's not going tochange a darn thing.
If you otherwise would have hadhigher earning years, that
would replace zeros, it wouldmarginally increase your benefit
(14:39):
and that might be factored intothe statement.
If those would be higherearning years, If it would be
lower earning years, then yourbenefit might reduce a little
bit.
So I mean, in two years timeyour benefit is not going to
change drastically, Even ifwe're talking about lopping off
zeros.
It might change by 50 or $100 amonth.
(14:59):
But I mean we're not going tosee these huge, dramatic shifts.
And people just have to knowthat you can stop working at the
age of 58 or 60.
You can wait to claim until theage of 62.
As long as you have your 35highest earning years, your
benefit's going to be there.
Speaker 1 (15:18):
Yes.
So the benefit's going to bedriven by a couple of things.
One is the average indexmonthly earnings and the number
of those that you have, so yourhighest 35 years and how much
were you actually paying in eachyear?
And then, second is when do youactually decide to collect?
Any time between 62 and 70?
Those decisions are notnecessarily commingled, meaning
(15:41):
the way you decide one does notimpact the other.
You could stop working at 40and still fully collect social
security at 70.
You could work until 70 andcollect social security at 62.
Now, probably not wanting to doso if your income's over a
certain amount because there'searnings limits and all that.
But they are two veryindependent decisions.
But those are the two decisionsthat are going to be the
(16:03):
driving force behind how muchwill you actually receive with
your social security benefit,erin, anything else you want to
add before we start to wrap up?
Speaker 2 (16:10):
I love how you phrased it as a two-prong
approach for Social Security.
Make sure you look at it fromthe stance of how many working
years do you have?
How long do you want to delay?
Do you want to claim early fullretirement age or delayed?
I think my biggest two cents Iwant to put out there is social
security is probably one of thebiggest, if not the biggest,
(16:31):
retirement income decisionyou're going to make.
So just don't throw it at adartboard and choose an age
randomly.
Choose an age that works foryou and any age can be great,
but just make sure it fitswithin your financial plan, yeah
.
Speaker 1 (16:46):
It's a big decision, lots of implications.
Hopefully this episode helpedto clarify some of the things
that decision hinges upon.
Speaker 2 (16:55):
So, Erin this is great and we will see you all
next time.
Sounds good.
Bye, guys, thank you.
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