Retiring in Your 50s? Here’s What That Could Do to Your Social Security Checks.

For many people, retiring in their 50s sounds like the ultimate financial goal. Leaving the workforce early can offer more freedom, less stress, and extra time to enjoy life while your health is still in good shape.

But stepping away from work for good in your 50s could have a major impact on your Social Security checks. It’s important to understand how retiring in your 50s might impact your future income, aside from needing your savings to last longer.

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How Social Security benefits are calculated

Social Security benefits are based on your lifetime earnings history — specifically, your highest 35 years of income. But if you retire in your 50s, you may not spend 35 years in the labor force.

For example, let’s say you got your first job at 22 and you retire at 52. That’s 30 years of earnings only, which means that for the remaining five years in your benefits formula, you’ll have $0 factored in. Those $0s could reduce the retirement benefits you’re entitled to, whereas working five extra years and avoiding those $0s could lead to larger Social Security checks.

The impact of retiring in your 50s on your Social Security checks could be even more substantial if you took time off earlier in your career or had much lower wages in your 20s and 30s. If you reach your peak earnings around age 50 but retire just a few years later, you could end up with a monthly Social Security benefit you aren’t as happy with.

How to work around smaller benefits

Retiring in your 50s isn’t necessarily a bad idea. And if you’re doing so because you’ve accumulated so much savings that you can afford to end your career so young, then your Social Security checks may not matter as much during retirement.

But some people retire in their 50s out of necessity, not because they’re loaded with savings. You may, for example, have to retire at 57 if you do physical work your body can no longer handle.

The good news is that there are steps you can take to offset the smaller Social Security benefits that may come from ending your career in your 50s. One option, for example, is to boost your income substantially right before you retire.

Let’s say you know in advance that your time in the labor force is limited. If you’re able to pick up a lot of overtime and extra pay your last year on the job, those higher wages could help boost your benefits.

Another option, if you have savings or another source of income, is to delay your Social Security claim for larger checks. Those benefits become available starting at age 62. But each year you wait, until you turn 70, results in a larger monthly payout for life.

Specifically, waiting until full retirement age, which is 67 if you were born in 1960 or later, helps you avoid reduced benefits. Delaying your claim past full retirement age boosts your benefits by 8% a year until age 70.

There are plenty of good reasons to retire in your 50s. But it’s important to understand how an early workforce exit might have a long-lasting impact on your Social Security benefits so you can plan accordingly.

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