Social Security benefits are often a critical component of a secure retirement. Two main factors determine the monthly benefit you will receive:
- How much money you earned during your working career
- The age you choose to start to receive benefits
Your Working History Affects the Amount of Your Social Security Retirement Benefits
The Social Security Administration (SSA) considers your highest-earning 35 years. If you worked less than 35 years, then you will have years where the SSA simply uses $0 for your earnings. Not surprisingly, the higher your earnings, the greater your retirement benefit will be. Note, however, that earnings over the annual limit are not considered in your benefits calculation.
When You Collect Social Security Impacts Your Retirement Benefits
The benefit amount calculated based on your working history assumes that you take retirement at your normal retirement age. However, you may choose to take your retirement at any time from ages 62 to 70. The earlier you begin to take retirement, the lower your benefit will be.
Although your benefit increases every year in retirement due to annual cost of living allowances, these increases are always based on your previous year’s benefits. Therefore, once you take a reduced early retirement benefit, all of your future benefits will be smaller than they would have been had you delayed retirement until your normal retirement age – or selected a delayed retirement age to retire.