Lynn Brenner Lynn Brenner

Brenner answers questions about all aspects of family finance.

I can retire at 58 with a small pension, but I won't take Social Security until age 62. How is my benefit calculated? Will not working from age 58 to age 62 be counted as four years of zero income, and will that reduce my benefit? Social Security says these four years will count as zero income years in my benefit calculation. But my colleague at work says those years don't count and won't reduce my benefit.


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The answer to your question really depends on entire your work history.

Anyone who has paid Social Security taxes for at least 10 years is eligible for a benefit. But the benefit calculation is always based on 35 years of earnings. So if you worked for only 10 years, it includes 25 years of zero annual dollars. And if you worked more than 35 years, it counts only the 35 highest earning years.

Assuming you have 35 years of Social Security earnings behind you at age 58, your colleague is right that having zero earnings for the next four years won't reduce your benefit. But no matter how many years you worked, your benefit will be permanently cut if you take it before your full retirement age. If you start collecting Social Security at 62, your check will always be 25 percent smaller than if you had waited until 66 (full retirement age for everyone born between 1946 and 1964).

The bottom line To find out how a decision to retire early or work longer would affect your future Social Security benefit, use the Retirement Estimator calculator, which is linked to your Social Security earnings record. The calculator lets you create "what if" scenarios, entering more or fewer work years at any hypothetical salary to see how those changes affect your benefit.

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