The Effect on Social Security Benefits If I Quit Work Before Retirement Age

Social Security can provide you with retirement income if you pay into the system during your career, but your benefits could be reduced if you retire early. You have to be age 62 to receive early retirement benefits. If you retire before age 62, your Social Security benefits may be affected depending on how many years you worked during your career and your income level when you retire.

Social Security Basics

You have to meet a minimum work requirement to be eligible for Social Security retirement benefits. As you work, you can earn as many as four Social Security credits a year -- one for every $1,130 in earnings -- and you need at least 40 credits to be eligible for retirement benefits. In other words, you have to contribute into the Social Security system for at least 10 years to receive benefits, so if you retire before you work 10 years, you aren't eligible for benefits.

Reduced Benefits

Retiring early is likely to reduce your total Social Security benefits even if you work at least 10 years due to the methods the government uses to calculate benefits. Social Security benefits are based on a monthly average of your 35 highest-paid years of work. Working fewer than 35 years reduces the average, which reduces your total benefits. If you worked at least 35 years, retiring early still reduces your benefits if your annual income at the time you retire is greater than any of the 35 years that go toward calculating your average. Since annual income tends to rise over time, delaying retirement usually lets you replace some low-income years with higher-income years, which boost benefits.

Taking Benefits Early

Taking Social Security benefits before your full retirement age permanently reduces your monthly benefit amount. Full retirement age ranges from age 65 for those born before 1938 to age 67 for people born in 1960 or later. Your benefit amount is reduced by 30 percent if you start taking benefits at age 62 when you first become eligible to take benefits. Your spouse can receive up to one half of your retirement benefit amount if that amount exceeds what she is entitled to based on her own work record. Your spouse’s benefits are also reduced if she takes payments before her full retirement age. You and your spouse can choose not to take benefits early, even if you retire before your full retirement age.

Working Past Retirement Age

Working past the Social Security early retirement age while collecting benefits can also reduce your benefits for the years between age 62 and full retirement age. You can receive Social Security benefits while you work, but if you do, your benefits are reduced by $1 for every $2 earned above $14,640 starting at age 62 and lasting until the year you reach your full retirement age.