Social Security and Early Retirement

Baby Boomers are retiring every day, and some of the younger baby boomers are considering retiring early. This might be due to the uncertainty surrounding the Social Security funding and the controversy of raising the retirement age in the near future.

Many pundits are predicting that there will be no Social Security in coming years. This might lead baby boomers, and perhaps some older generation X’ers to consider early retirement and get whatever they can out of Social Security now. But is that a wise idea? For some, it may be and for others, it may not.

Pros of early retirement

  • The ones who would benefit most from early retirement are those who have invested carefully while they were working and would have an income they can collect and live on just from that.
  • Or, you can do the reverse. Live off the Social Security check and keep your savings and investments growing. This probably would make more sense if you have your investments tied up in stocks. However, you want to be sure to move your investment to a safer risk category. You want to still have some accumulation, but not at a risk.
  • If the kids are grown, the house is paid off, there is no outstanding debt, and you are in good health, it may be a great option.
  • Since you could live on your savings, you can take the Social Security payments and invest the entire amount. You could end up with more from your investments than if you waited for the increased benefits from Social Security to retire much older.
  • The key to choosing to retire early and lose out on bigger benefits later is you not really need the Social Security check to live on.
  • If you have made a really good living during your productive working years, you probably have a much larger benefit to retire on, even if you do retire early.

Cons of early retirement

  • If you have saved very little, and are already close to retirement age, this might not be a good option for you.
  • If you take early retirement and have no other income on which to live, you could have a hard time making ends meet in the coming years with cost of living increases.
  • If you have an option to live with other family members who can contribute to your living expenses, this might change things to make it a possibility.
  • If you are in poor health and cannot work until you are 66 or older, then you may have to go ahead and retire early anyway. Hopefully if this is you, you will have family that can help you or that you can live with so you do not have any additional living expenses.
  • If you are in good health and do not have a lot of investments or savings, it will probably make sense to work as long as you can so you can retire on the bigger Social Security benefits

Get Opinions

  • No matter what, you will want to sit down with several people who can give you expert advice and opinions.
  • First, you will want to talk to an investment professional who can show you your options and bottom line numbers.
  • Secondly, you will want to talk to some smart retired people who have invested well and understand the system, but have no stake in your decision. Investment people will sometimes tell you what benefits them more, not you.
  • Last but not least, you will want to talk to someone or several of your trusted family members about the information you have obtained and ask for their opinion.

No matter what category you fall into, if early retirement is what you are after, even if it is coming up soon, set yourself on a frugal and rigid course now so that when you do take the plunge you will be in a good place financially to do so.