Many individuals have a specific retirement age in mind, but delaying retirement by just a few years can significantly impact Social Security income. Here’s why it matters.
35 Years of Work History
When calculating the monthly Social Security benefit for retirement, eligibility is based on the 35 highest-earning years in the workforce. However, extended breaks from work, such as raising children, caring for family members, or pursuing further education, may result in a shorter work history and $0 income factored into the benefits calculation. One way for individuals to boost their Social Security income is by working for a longer period of time and replacing any years with zero earnings with actual salary. This means that by continuing to work and earn, individuals can increase their Social Security benefits and ensure a more financially secure retirement.
Full retirement age
Based on their earnings history, individuals who reach full retirement age (FRA) are eligible to receive their full Social Security benefits. Those born in 1960 or later have a FRA of 67. However, claiming benefits can be done as early as age 62, though this results in a reduced monthly benefit. Conversely, delaying the claim past FRA can lead to a boosted monthly benefit for life. While waiting until age 70 provides the maximum benefit boost, even delaying until 68 or 69 can significantly increase monthly payments, benefiting retirees over two decades or more.
Working Longer
Working longer can have substantial financial rewards. Working hard throughout one’s life warrants the opportunity to enjoy retirement, but in some cases, extending the working years can lead to a more comfortable future.
Even part-time work can make a difference, especially when matched with modest spending reductions. This approach allows individuals to cover their expenses for a couple of years while they wait to file for Social Security. Shifting to part-time work instead of committing to full-time can make the transition into retirement smoother, regardless of its impact on Social Security benefits. It gives individuals flexibility and the chance to enjoy a more balanced lifestyle while still earning income.
Individuals can make informed retirement decisions by understanding the impact of working longer. Taking into account the advantages of a longer work history and the opportunity for a boosted Social Security benefit, it may be beneficial for many to reconsider their retirement age and consider working a bit longer.