Does early retirement appeal to you? Are you counting on your Social Security benefits as all or part of your retirement income? Then understanding the effect that early retirement has on your benefits is essential.

Regardless of what year you were born, you can retire at age 62 and receive Social Security benefits. But your full retirement age is determined by your year of birth and taking retirement before your full retirement age will reduce your benefits for every month between 62 and full retirement.

For instance, if you were born in 1944, your normal, or full retirement age is 66. If you retire this year at 62, you will retire 48 months early. You would suffer a 25% reduction in your monthly benefit. If your monthly benefit would have been $1000 at age 66, it will be reduced to $750 due to collecting your benefits before your full retirement age. In planning for early retirement, these reductions need to be calculated and considered carefully.

To figure the reduction that would be applied to you, see the chart at the Retirement Planner at the Social Security Administration’s website.

On August 18th, President Bush signed into law The Pension Protection Act of 2006. This bi-partisan bill brings sweeping reform to America’s pension laws in an attempt to ensure millions of Americans a more secure retirement. With more Americans reaching retirement age and the millions of Baby Boomers approaching retirement age, this legislation is aimed at relieving the foreseeable strain on publicly funded programs such as Social Security.

The Pension Protection Act contains measures that will strengthen the federal pension insurance system in several ways. The new legislation:

* Requires additional premiums from companies that under-fund their pension plans;
* Extends the requirement that companies that terminate their pensions provide extra funding for the pension insurance system;
* Requires companies to measure the obligations of their pension plans more accurately;
* Closes loopholes that allow under-funded plans to skip pension payments;
* Raises caps on the amount that employers can put into their pension plans;
* Prevents companies with under-funded pension plans from promising extra benefits to their workers without paying for those promises up front.

The new Pension Protection Act also gives some new benefits to workers, and makes it easier for them to build their nest egg for retirement. Some points of the legislation regarding 401K plans and IRAs are these:

* Previously, companies were prevented from automatically enrolling employees in contribution plans, this legislation removes those barriers. Studies show more employees participate in 401K plans when they are enrolled automatically than will if they have to sign up;
* Gives workers more information about the performance of their accounts;
* Provides greater access to professional advice about investing for retirement;
* Gives workers greater control over how their accounts are invested;
* Makes permanent the higher contribution limits for IRAs and 401(k)s that were passed in 2001.

Quiz time : Any idea what the retirement age is in the U.S?

A) 55
B) 59 ½
C) 65
D) 67

Since you knew it was a trick, and I can’t type upside-down, this isn’t much fun. Anyway, the answer is none of the above. You can retire whenever you feel like it. The question is: can you afford to? If you want to retire today, go for it. Best of luck to you…

The numbers above look familiar, right? Where do they come from?

• Age 55 is sometimes the “retirement age” for 401k plans, where you can take money out of the Plan without tax penalties.
• Age 59.5 is the age at which you can start to take money from IRA’s and other accounts without penalty or restriction. There are ways, but it’s tricky.
• Age 65 is when some folks get full Social Security benefits
• Age 67 is when anybody born after 1960 gets full social security benefits

Based on where you will get your income from in retirement, these numbers might help you figure out what your retirement age is.