Early Retirement and Social Security Considerations

Early retirees must save aggressively, as relying on Social Security may lead to insufficient benefits.

### Navigating Social Security for Early Retirement: Key Insights and Considerations
* 🧑‍  Planning to retire at 45 means you won't access Social Security for **over 20 years**, so it's essential to understand how this **impacts your benefits**.
* 📉  Your Social Security benefit may be **significantly lower than estimated** if you stop working at 45 and don't contribute to the system until 65, which is a **common misconception among early retirees**.
* 💰  To compensate for the potential reduction in Social Security benefits, you should consider **saving even more during your working years**.
* 🧐  Early retirement requires **aggressive saving strategies** and a **conservative approach to future financial assumptions** to avoid surprises later in life.
* ⚠️  Be cautious about relying heavily on Social Security as a primary source of retirement income, especially if you're in your 30s, as the system's **financial stability is uncertain**.
* ⏳  For those nearing retirement age, it's generally advisable to **wait until at least full retirement age or 70 to maximize benefits**, as taking Social Security at 62 often results in **reduced payments**.
* 📈  Delaying benefits until 70 can yield an **8% increase annually**, providing a **solid return on your investment** in the system, but personal circumstances should guide this decision.
* 💡  Ultimately, focus on **building your savings and preparing for retirement** without over-relying on Social Security, ensuring a **secure financial future**.

[Music] This is Massami Trains is the username. It says, How should I deal with Social Security in early retirement? I'm planning on retiring at 45, so I won't have Social Security for over 20 years. Can my number be lower knowing that I have Social Security coming? When is May going to retire at 45? He didn't say his age, so if you would like to share that, that would be helpful information, but that's pretty early. Well, let me tell you a com, Brian. I'm gonna, here's what I say, think. I want you to answer all like, when can I draw Social Security and what happens when I do that and all that. Here's just a common fallacy that a lot of our early retirees have, and I actually had to go over this with a client in their retirement meeting yesterday. When you go look at your Social Security statement, you go to ssa.gov and you pull that down. One of the things it'll give you is like what your estimated benefit is going to

be and the way they calculate that is based on your earnings record that you've earned up until that point, and they make some assumptions of what you will continue to earn until you retire. Well, if you want to have an accurate number around what your social security benefit is going to be, and you're someone who is retiring early, you have to go a step further. You have to actually calculate what happens if I check out of the workforce at age 45, and I do not pay into the system between age 45 and 65. And what you're going to figure out is that your benefit is going to be likely substantially less than what the estimated benefit was on your social security statement. So, you have to notice that. So, I would argue, uh, M mamini mamimi mamini just going mass mass. Uh, one of the things that you have to think through is if I am retiring early, and I'm not going to be paying into the social security system, my social security is social security is going to

be less so I need to save even more. I need to be even more prepared for that. Uh, that's just a caveat that we see a lot of people miss. I think it'd be interesting to talk about some of the options around social. I want to talk about mindset stuff too, is 'cause Mass here is retiring at 45, is a very aggressive goal. So, that's going to require you making some life decisions where you're going to be saving a ton of your, a large, large percentage of your take-home pay. And then, I need you to have your assumptions for what the next chapter of your life, your next endeavor of life, is going to look like. It needs to be as conservative as possible so that you don't, you know, get to be 47 years old and realize, Oh my gosh, I have, there's so many things I just didn't, was not aware of, or for 52 years of age, whatever year in the future after you've made that threshold of walking away from your high income. Um, Social Security. I

Don't mind sharing with you. I'm somewhat biased on it, having a father that passed away in his early 50s. I got ticked off when I saw how survivors are treated with Social Security, and then when you research how the funding of Social Security is handled by our government. Any young person, you need to be very skeptical that you can assume that this thing is going to pay large sums of money to you. Now hopeful you get old enough, and you get that key demographic that all politicians love, which is older people that vote consistently, and they're going to cater to you. But young people, be careful of Social Security because it's just not on the most able financial situation. So, I would, so in that vein, if you're 33 years old, that qualifies on the younger end of the spectrum. I would be careful counting on Social Security to be a huge part of my retirement income. Now, if his question is, am I taking this at 62, am I taking this

at 67, am I waiting until I'm, you know, 70 and be, you know, 70 and beyond to maximize this? You're way getting in the details on something that we don't even know what the dynamic or the assumptions. I will tell you for just people who are getting closer because there's going to be a lot of people in our audience that are in their 60s and trying to figure this out, is that I think 62 is a sucker bet for most people. Now, if you're a working couple, both of you worked, there's a lot of times where you will do strategies where the spouse that retires earlier or, you know, or who doesn't have the higher income might take it at 62, and then because you're going to hit the family maximum anyway, there's some dynamics that you can take advantage of. But for most people, if you were just looking at your earnings base, you're going to want to wait until you're somewhat closer beyond 65 or even full retirement age just because the

government penalizes you for working under 65. They severely discount your benefit. And then for people who have saved a lot and you and and life expectancy, meaning you have good family history for living um you know beyond 70 um. There is something to be said for full retirement age Day 70. They give you a guaranteed 8% increase every year. That's a that's a pretty good guaranteed rate of return. That takes the risk off of assuming the system doesn't fall in upon itself um. But it is one of those things where once again this is another part where personal finance gets very personal when you get these decisions. But if I'm 30 in my mid-30s you know early 30s thinking about that I'm going to be part of the fine movement and move to a next Endeavor in my mid-40s. Social security is more of a asri or or footnote thing that I put in there. This is not the main driver of my decision matrix. It's more on you and what you're saving and building so that

you you don't have any regrets or some uhoh when you when you make those big decisions. It's great.

How Should I Handle Social Security in Early Retirement?

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Dealing with Social Security in Early Retirement

Retiring at 45 means not paying into Social Security for 20 years, which can significantly lower the estimated benefit.

It's important to calculate the impact of leaving the workforce early on Social Security benefits.

The common fallacy is assuming the estimated benefit on the Social Security statement will remain accurate without continued earnings.

Retiring at 45 requires aggressive saving and conservative life assumptions.

It's important to be skeptical about relying on Social Security for retirement income, especially for younger individuals.

Making informed life decisions and having a clear plan for the future are crucial to avoid unexpected challenges later on.

Waiting until after 65 or full retirement age is generally advisable to maximize Social Security benefits, as working under 65 can lead to penalization and discounted benefits.

For couples, strategic planning around retirement ages can be beneficial, especially if one spouse has a lower income.

Delaying benefits until 70 can provide a guaranteed 8% increase per year, offering a solid rate of return for those with a good family history of longevity.

Some people navigate big decisions without feeling any regrets or doubts.

This approach to decision-making is seen as positive and admirable.

The ability to move forward confidently is a valuable trait.