When You Reach This Social Security Milestone, You Might Be Ready To Retire

There comes a time in every worker's life when the pull of retirement living becomes too strong to resist. Everyone wants to leave the working life behind, but no two exits will ever be the same. Some people have the means and motivation to retire early while also utilizing some key strategies to bridge the income gap ahead of drawing Social Security checks. Social Security benefit value is, in fact, one of the key indicators of any individual's readiness to retire. 

You can check in on your benefit value progress by setting up an account with the Social Security Administration (SSA). This account offers nuanced insights into your income and tax history and can enlighten you as to the benefit amount you stand to receive at any given moment along your savings journey. One important number to keep at the forefront of your focus is 35. It becomes clear right away when perusing your account information that Social Security benefits are calculated based on your 35 highest-earning years in the workforce. SSA calls this "average indexed monthly earnings," or AIME.

Anyone who retires before spending 35 years in gainful employment will have at least one detrimental zero added to their calculated average, and the pain only grows with each additional year without an income figure. Reaching the milestone of 35 years in the workforce offers you a full slate of earnings to plug into your personal calculation, immediately boosting the value of your Social Security benefits for the rest of your life.

With the average American retiring at 62, you'd need to start working at 27 to tally these years; at the full retirement age of 67, that starting threshold shifts to 32. That acts as a quality starting point, and most won't have trouble here, but plenty of complications can arise along the typical worker's life path. Extended time in graduate education or even time away from work with a long-term illness or injury can stand in the way of this goal. To put it another way, assuming you earn roughly the average American salary, rounded to $65,000 for simplicity, over the course of your career, the average income drops by $1,857 for each year you're not making money.

Once you've accumulated 35 years of earnings, the question shifts to maximizing your "highest-earning years." Many young people take on part-time work during school or shortly after graduation before they land a more permanent role. The Bureau of Labor Statistics reports median weekly earnings for part-time employees 25 and older at $448, which translates into a little over $23,000 annually. With two of the 35 calculation years reflecting this value instead of the $65,000 salary, for example, your average drops to $62,600. Turn that into five years, and the annualized salary dips down to $59,000. Therefore, for each year you decide to delay your retirement at the back end, you gain the ability to drop a low-earnings year (or one with no income) and replace it with a much higher mark.