My brother and I had a conversation, the other night, about a relative who is debating early retirement.  His job recently went away and finding another at his age would be pretty hard.  He questioned the difference in monthly income he’d lose if he takes early Social Security retirement.  The question posed is should he retire at 62 or wait till he reaches 66?

My first question was does he need the money?  In his case social security would pay him approximately 500 dollars less, now, than if he waited a few more years.  He probably could wait, but life would be better with the income.

According to several people I’ve asked, a person should take it at 62 if (s)he no longer has a work related income.  However, if you take it at 62 and earn more than $15,120 in any year up to age 66, you must pay a portion back.   The question still holds – should he take early retirement or should he find some type of employment and hang on until age 66?

For him the difference in monthly SS income is approximately $500 or $6,000 per year.  That difference would remain in effect forever, if he takes early benefits.  On a purely economical basis, is it worth it?  A loss of $6,000 for 4 years seems like a lot, but look at the income side.  If he receives $1,500 per month for those four years or $18,000 a year, that’s a total of $72,000.   If he waits till 66 the added amount would be $6,000 per year.  So how many years would it take to make up the difference? 72 divided by 6 is 12 years.  Yes it would take 12 years to make up the difference in lost income if he waited till age 66 to retire.

I guess the question should really be – will he have enough non- work related income to give him a comfortable retirement, or will he have to continue working?  If he has to continue to work, then the penalty might not be worth it.  If he can truly retire, then I am beginning to think that the lower benefit would be worth it for him.

For many that the reality is getting close.  Baby boomers are fast approaching or have already reached early retirement age.   In our economy, most people have to work harder to stash money away for retirement. Many don’t have enough in their retirement programs to allow them to stop working anytime soon.  For my relative, it’s a no brainer – take early retirement and enjoy his life.

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