Social Security provides a critical income stream for most Americans in retirement; yet the checks we receive are usually smaller than we'd like. The average Social Security retirement benefit was recently $1,344 per month, or about $16,000 per year, and the overall maximum monthly Social Security benefit for those retiring at their full retirement age was $2,639 in 2016 -- or about $32,000 for the whole year.
Retiring early and starting to collect Social Security checks early is something many people want to do -- yet that will make the checks even smaller. You're not completely out of luck, though. There are steps you might take to boost even benefit checks that start early.
Selena Maranjian: One of the best ways to make your monthly Social Security checks fatter, even if you retire early, is to work a little more. You can do that in several ways. First, you might just work a year or two longer at your regular job, delaying retirement a bit. If your normal retirement age is 67 and you'd planned to retire at age 62, the first year at which you can start collecting benefits, you might just retire at, say, age 64 instead. That still has you retiring early, and it will also ultimately give you bigger checks.
That's because your checks grow larger by about 8% for every year beyond your normal retirement age that you delay starting to collect, until age 70. They also become smaller the earlier you start collecting them, between age 62 and your normal retirement age.
If your normal retirement age is 67 and you start at 62, your checks will be about 30% smaller. (That's not as bad as it seems, though, since you'll be collecting lots of those checks between age 62 and 67. If you live an average life span, the Social Security Administration says you'll come out about even.)
Another option is to work more while you're working. The Social Security formula bases your ultimate benefits on your 35 highest-earning working years. If you only work 33 years, the calculation will include zeros for two of the years -- so being sure to have 35 years' worth of work will increase your eventual payouts. Similarly, even if you have 35 years' worth, if you can make your last years' incomes as high as possible, that will serve to boost your payout, too. You might grab an available promotion, or perhaps take on a temporary second job.
Brian Feroldi: If you choose to claim Social Security benefits early, and are still pulling in an income by working, then you might have been shocked to realize that the government actually penalizes you by withholding a portion -- or all -- of your benefit. Everyone who claims Social Security early is subject to an "earnings test," and if you make more than the lower limit allowed – which is $15,720 in 2016 – then the government will withhold $1 in benefits for every $2 that you earn over that limit.
Thus, one way that retirees in this situation can boost their benefit checks is to simply not earn too much. That's likely to be an unattractive compromise for the vast majority of early retirees, as they'll be giving up more in other income than they will be gaining in benefit; but if you have the flexibility to work a little less, and want to boost your payout, it's an option.
Anyone who tries to claim early and "fails" the earnings test doesn't need to worry about it affecting his or her benefits over the long term, though. Once a person reaches full retirement age, the Social Security Administration will adjust the monthly payment upward to account for any benefits withheld.
If you're thinking about tapping your Social Security benefits early, and are worried about how the earnings test might affect you, play around with this easy-to-use calculator to get a better understanding of how this will apply to your situation.
Sean Williams: For some workers, their health or low income levels may not offer them much of a choice, forcing them to file early for Social Security benefits. Doing so could cause these individuals to be paid just 75% of their full retirement benefits. But there's another group of early Social Security benefit filers who aren't in a financial bind, and could benefit in a big way by making one smart move.
For workers who've recently retired and have filed for Social Security benefits within the past 12 months, SSA Form 521 is available to you as a sort of mulligan, or do-over, if you regret taking your benefits early. The SSA Form 521 is the Request for Withdrawal of Application form, giving retirees a 12-month window in which to retract their desires to receive benefits checks. Remember, the longer an individual waits to access payments, the more those benefits will grow over time. Every year held off claiming between ages 62 and 70 results in a commensurate increase of roughly 8% in monthly benefit payments.
With SSA Form 521, the worker in question would be required to pay back every cent in benefits received since filing for benefits. To repeat, this can only be done within the first 12 months of taking your benefits, not after. If you qualify, though, it'll be as if you had never filed for the benefits in the first place, and your benefit will continue to grow larger up until age 70.
Who might consider doing this? Good examples would be workers who decide to get a job in their early to-mid 60s, and are suddenly generating income that could be used to pay monthly expenses, or retirees who realize that they can comfortably live on income provided by a retirement account or investment portfolio instead of relying on reduced Social Security benefits.
Never assume that you can't change your financial circumstances -- even in retirement. Read up on your options, and make decisions that will serve you best.