Sunday, September 27, 2009

Early Retirement and Social Security

Job Losses, Early Retirements Hurt Social Security was a Yahoo News headline today in the top, featured, most popular, politics, and business news categories. The article talks about the current state of the system and that some people, due to job layoffs and the economy, are starting to draw their Social Security retirement earlier than expected. But just yesterday on talk radio I heard a question from the other side of the aisle.

The caller to a financial advice program wondered what effect quitting work at 56 would have on his monthly Social Security check when he reached retirement age. By not paying in for several years, he would be reducing the number of years of income on which his benefit would be calculated. What comes to my mind is that the system’s trouble will be compounded with fewer people paying in whether people start drawing early or not. Where exactly is the security part? Does anyone know?

So I have a word of caution. As there can be serious ramifications and unintended consequences to early retirement, whether you’re discontinuing paid employment or applying for Social Security benefits, be sure to consider all factors. Do your research. Discuss your options with a financial advisor, if necessary, so that you understand how various choices will impact you now and in the future. At the age of 44, I chose to discontinue my 9-5 job and more fully enjoy my life. Before I made the plunge, however, I realistically analyzed my situation and projected to the best of my ability whether this was a prudent decision. I also took other steps prior to resigning, such as eliminating all debt. I haven’t regretted it one minute, and the older I get, the happier I am that I courageously moved forward with my dream. Who knows if Social Security will even be around when I finally reach my mid-60s. Whatever form it takes will probably look very different than it does today. But it’s not the only egg in my basket and I have the benefit of time to modify my plans based on the current reality when the time finally comes.

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