Thinking of retiring early? What happens to your Social Security if you end your career in your 30s or 40s

A number of young people who don’t want to work until their mid-60s have joined the FIRE (Financial Independence, Retire Early) movement, with a plan to retire in their 30s or 40s.

But what does that mean for their Social Security benefits?

Don’t miss

One study commissioned by Credit Karma found that 53% of Gen Z consider themselves part of the FIRE movement, which requires extreme savings — typically 50% or more of their income — by living lean and cutting back on expenses.

While you could potentially live off your savings and investments if you retire in your 30s or 40s, you can’t claim your Social Security benefit until age 62, at the earliest, and you’re not eligible for Medicare until age 65.

How Social Security benefits work

Your full retirement age, as defined by the Social Security Administration (SSA), isn’t necessarily the age you stop working. It’s based on your year of birth, which typically works out to somewhere between age 66 to 67. You can apply for your benefit starting at age 62, but your benefit will be reduced accordingly — and that reduction could be as much as 30%.

Your benefit is calculated using your average indexed monthly earnings (AIME), which is taken from your 35 highest-earning years and adjusted for wage levels and cost of living. The resulting calculation is called your primary insurance amount — the amount you’ll receive at full retirement age.

The average Social Security benefit was $1,907 in January 2024, according to the SSA. This, of course, will vary, depending on your AIME and the year you claim your benefit.

Story continues

Read more: This little-known investment strategy can save you thousands on your taxes

But to get Social Security in the first place, you’ll need 40 “credits” of work, which you earn as you pay Social Security taxes (up to a maximum of four credits per year). In 2024, you can earn one Social Security and Medicare credit for every $1,730 of earnings — meaning you’ll need to earn $6,920 to get the maximum four credits for the year.

If you earn four credits a year, you’ll accumulate 40 credits after 10 years, so you don’t need to work 35 years to be eligible for Social Security.

However, if you have fewer than 35 years of work under your belt, that will impact the amount of your benefit. The SSA calculates your AIME using $0 for each year without earnings. So, if you retire in your 30s or 40s, any years with no earned income will reduce your overall benefit amount.

How FIRE could impact your retirement

If you’re considering a very early retirement — in your 30s or 40s — you’ll need to make sure you can afford to do so. Though you don’t require 35 years of work to claim your Social Security benefit, keep in mind the years you don’t work will drag down your overall average.

Social Security benefits are based on a sliding scale, which is designed to help low-wage earners who need retirement income most. In other words, higher earners get lower percentages of salary credit. Although, the less you earn, the smaller your benefit.

There are several online Social Security calculators that can help you figure out how this could impact your benefit. Depending on your income while working, the hit to your benefits could be anywhere from a few dollars to hundreds of dollars.

However, if you retire before you’ve earned 40 Social Security credits, then you won’t qualify for Social Security benefits at all.

If you’re part of the FIRE movement and have money stashed away in a 401(k) and/or IRA, you can start withdrawing funds at age 59-and-a-half without having to pay a penalty. But, before you retire, you’ll need to aggressively save and invest, because you’ll need enough to live on before you can claim Social Security — and possibly enough to supplement your lowered benefit for 30-plus years.

What to read next

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.