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Know Social Security Rules Before Retirement

Find out about credits, amount of benefit and when to collect

By Social Security Administration | March 20, 2013

When you work and pay Social Security taxes, you earn “credits” toward Social Security benefits.

The number of credits you need to get retirement benefits depends on when you were born. If you were born in 1929 or later, you need 40 credits (10 years of work).

If you stop working before you have enough credits to qualify for benefits, the credits will remain on your Social Security record. If you return to work later on, you can add more credits so that you qualify. No retirement benefits can be paid until you have the required number of credits.

How Much Will Your Retirement Benefit Be?

Your benefit payment is based on how much you earned during your working career. Higher lifetime earnings result in higher benefits. If there were some years when you did not work or had low earnings, your benefit amount may be lower than if you had worked steadily.

Your benefit payment also is affected by the age at which you decide to retire. If you retire at age 62 (the earliest possible retirement age for Social Security), your benefit will be lower than if you wait until later to retire. This is explained in more detail below.

Note: Each year, your online Social Security statement is updated. It can be a valuable tool to help you plan a secure financial future. It provides you with a record of your earnings and gives estimates of what your Social Security benefits would be at different retirement ages. It also gives an estimate of the disability benefits you could receive if you become severely disabled before retirement, as well as estimates of the survivors benefits Social Security would ­provide your spouse and eligible family members when you die.

You Can Get Retirement Benefit Estimates

You can use the online Retirement Estimator to get immediate and personalized retirement benefit estimates to help you plan for your retirement. The online Retirement Estimator is a convenient, secure and quick financial planning tool, because it eliminates the need to manually key in years of earnings information. The estimator will also let you create “what if” scenarios. You can, for example, change your “stop work” dates or expected future earnings to create and compare different retirement options.

Full Retirement Age

If you were born in 1942 or earlier, you are already eligible for your full Social Security benefit. If you were born from 1943 to 1960, the age at which full retirement benefits are payable increases gradually to age 67.

Early Retirement

You can get Social Security retirement benefits as early as age 62, but if you retire before your full retirement age, your benefits will be reduced, based on your age. For example, if you retire at age 62, your benefit would be about 25 percent lower than what it would be if you waited until you reach full retirement age.

Some people stop working before age 62. But if they do, the years with no earnings will probably mean a lower Social Security benefit when they retire.

Note: Sometimes health problems force people to retire early. If you cannot work because of health problems, you should consider applying for Social Security disability benefits. The amount of the disability benefit is the same as a full, unreduced retirement benefit. If you are receiving Social Security disability benefits when you reach full retirement age, those benefits will be converted to retirement benefits.

Delayed Retirement

You may choose to keep working even beyond your full retirement age. If you do, you can increase your future Social Security benefits in two ways.

Each additional year you work adds another year of earnings to your Social Security record. Higher lifetime earnings may mean higher benefits when you retire.

Also, your benefit will increase automatically by a certain percentage from the time you reach your full retirement age until you start receiving your benefits or until you reach age 70. The percentage varies depending on your year of birth. For example, if you were born in 1943 or later, 8 percent will be added to your benefit for each year that you delay signing up for Social Security beyond your full retirement age.

Note: If you decide to delay your retirement, be sure to sign up for Medicare at age 65. In some circumstances, medical insurance costs more if you delay applying for it.

Deciding When to Retire

Choosing when to retire is an important but personal decision. Regardless of the age you choose to retire, it is a good idea to contact Social Security in advance to see which month is best to claim benefits. In some cases, your choice of a retirement month could mean higher benefit payments for you and your family.

In deciding when to retire, it is important to remember that financial experts say you will need ­70 to 80 percent of your pre-retirement income to have a comfortable retirement. Since Social Security replaces only about 40 percent of pre-retirement income for the average worker, it is important to have pensions, savings and investments.

It may be to your advantage to have your Social Security benefits start in January, even if you do not plan to retire until later in the year. Depending on your earnings and your benefit amount, it may be ­possible for you to start collecting benefits even though you continue to work. Under current rules, many people can receive the most benefits possible with an application that is effective in January.

You should apply for benefits about three months before the date you want your benefits to start.