6 reasons why some clients may opt for early retirement

The Social Security Act was signed into law in 1935, and the first lump sum payments were distributed in January 1937.1 Today, nearly 9 out of 10 Americans age 65 and older receive Social Security benefits averaging $1,905 per month for each retired worker.2

The decades-long history of Social Security payments has many people figuring benefits into their retirement strategy. Waiting until full retirement age (FRA) to claim benefits or delaying retirement until age 70 is often the central question since 95% of married couples and 88% of individuals place a high priority on maximizing retirement benefit dollars.3

Getting the most out of retirement benefits is a common and worthy goal, but is it always the best strategy for your clients?

Life happens. In some cases, claiming Social Security benefits early may be the most feasible option. If a client finds themselves facing any of the following circumstances, facilitating discussions about collecting Social Security before FRA may be financially prudent:

1. Uncertain health

Health issues can play into the decision to retire early. In some cases, care may necessitate immediate financial support. Certain chronic medical conditions may add considerations about longevity that compel clients to draw benefits before FRA. Health can be a sensitive topic for clients, so proceed with caution when exploring what makes sense from an objective financial perspective.

2. Job loss or career transition

Losing a job or voluntarily leaving to pursue other interests prior to reaching FRA can create a financial gap. Early retirement may provide the needed financial resources during these types of transitions.

3. Immediate financial need

Expenses can take an unexpected turn, putting some clients in the position to get Social Security benefit dollars flowing. Early retirement may be the shortest path to alleviating financial pressure without disrupting other retirement funding strategies that are in place.

However, not all situations that may trigger early retirement are dire. Some clients may opt to draw Social Security benefits in order to fund certain personal decisions:

4. Choosing early retirement

Walking away from the workforce on their own terms may be possible for some clients, provided they are willing to absorb an early retirement penalty. Retiring at 62 instead of FRA could reduce benefits by as much as 30%, depending on birth year.4

5. Prioritizing family time

When children and grandchildren enter the picture, or the dream of traveling with a spouse is within reach, the desire to spend more time creating cherished memories increases. Some clients may see early retirement as a way to curate the lifestyle that supports a family focus.

6. Optimizing spousal benefits

For married couples, there may be advantages to having the lesser-earning partner retire early while the higher earner files at age 70. The partner who retired early could then transition from their initial retirement benefit to a spousal benefit, often resulting in higher lifetime payments. Presenting this option to clients in a position to pursue it may get them reconsidering their retirement strategy with your guidance.

There are myriad reasons why drawing Social Security benefits before full retirement age could be a fit for some clients, but the decision should be well-informed. Talk to your TruStage™ wholesaler to explore options for various client scenarios, and consider working with them to host an educational Social Security & Your Retirement Seminar for clients and prospects.

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