Most Americans who retire count on Social Security at least in part for retirement benefits. But how much your benefit amount will be depends on your age at the time you retire. The earliest age at which a person can retire and receive Social Security retirement benefits is age 62. However, the amount of the benefit you receive will be lower than if you wait until the full retirement age to retire. The older you are when you retire increases the amount of the benefit up to the maximum.
Step 1
Get rid of debt, especially credit card debt that comes with high interest rates. Living a modest lifestyle after you retire means having fewer bills so that you have more money, although you may have to sacrifice some amenities before you retire. According to the Social Security Administration, only about 58 percent of the income the average retiree needs comes from Social Security and pensions. The remainder must come from other sources such as savings and investments. These estimates are based on retirees needing 70 percent of their annual pre-retirement income in order to live.
Step 2
Consider what kind of lifestyle you want to lead after you retire, especially since you will be living on a fixed income. Take a careful look at any other assets you have that will produce income. Make sure you can afford to retire early if you plan to rely on the retirement benefits you will receive from Social Security as a primary source of income. A 2006 survey conducted by the Retirement Corporation of America shows that one in four Americans intends to depend on Social Security as a major source of income during their retirement years.
Step 3
Use the online Social Security Retirement Estimator to calculate your retirement benefit estimates. This financial planning tool allows you to create different circumstances so that you can compare different retirement options, especially if you are considering taking an early retirement. The calculator bases your retirement benefit estimate on your actual earnings history.
Step 4
Contact the Social Security Administration in advance to find out in which month you should retire. Even if you do not plan to retire until later in the year, claiming your retirement benefits beginning in January could give you the advantage of receiving higher benefit payments. Depending on how much you earn at your job, you could qualify to start collecting benefits for a few months before you actually retire from your job. Applications effective as of January generally offer retirees the most benefits possible.
Step 5
Assemble the required documents before you apply. Although you may need only some of these documents, it is better to be prepared. When you apply for Social Security benefits, you will need your Social Security number, birth certificate, W-2 forms or tax return showing self-employment for the last year, the name of your bank and bank account number. You may also need to present your military discharge papers if you were a member of the military, and proof of U.S. citizenship if you were not born in this country. You must submit all original documents or certified copies, which the Social Security Administration will return to you.
Step 6
Apply for benefits approximately three months prior to the date you want your benefits to start. Talk to someone at your local Social Security office if you are thinking about retiring in the near future, but are still uncertain as to when would be the best time.
Tips and Warnings
- Individuals can apply for Social Security retirement benefits in person at any Social Security office, by calling 1-800-772-1213 or online at www.socialsecurity.gov.
- If you retire before full retirement age, this will permanently reduce your benefit amount, which is based on your age. If you decide to retire at age 62 instead of waiting until full retirement age, the amount of your monthly benefit will be about 25 percent less than it would be if you retire at full retirement age. Even if you retire at age 62, you will not be eligible for Medicare until you are age 65.
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