The U.S. Added Only 29,000 Jobs in September, and Leaving Work at 63 Could Lock In Lower Social Security Years

Quick Read

• Social Security uses a worker's 35 highest-earning years, so retiring at 63 can freeze in weaker early-career earnings.

• Replacing a $20,000 indexed year with an $80,000 year can lift average monthly earnings by about $143, increasing lifetime benefits.

• Claiming Social Security at 63 instead of waiting until full retirement age of 67 permanently reduces benefits by 25%, but leaving work and claiming benefits are separate choices.

The labor market is offering little comfort to job seekers. U.S. employers added only 29,000 jobs in September, down sharply from 133,000 in August, according to a Bureau of Labor Statistics report. The agency also revised its July and August totals lower by a combined 60,000 jobs. For someone who loses a job late in their career, starting over can suddenly feel risky.

Imagine a 63-year-old operations manager with decades of stable work behind him. His role disappears. Faced with months of interviews, a probable pay cut and several more years of commuting, he decides rebuilding his career is not worth it. He has savings and is ready to stop working.

Many people in their early 60s face this same crossroads, and it involves two separate decisions: when to stop working and when to claim Social Security. The first can carry a cost that is often overlooked, and the second is frequently made too quickly.

Why His Final Working Years Could Still Increase His Benefit

Social Security calculates retirement benefits based on a worker's 35 highest years of covered earnings. Past wages are indexed, meaning they are adjusted upward to account for wage growth over time. A worker's final years can still make that top 35, potentially replacing lower-earning years from earlier in life.

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Stopping work at 63 could eliminate the chance to improve his earnings record. His history may include lean years in his early 20s, a period of part-time work, or years with no covered earnings at all. Another strong year could replace one of those weaker years and raise his future check. If he never works again, that opportunity is gone.

People who began their careers later, stepped away to care for family, or were self-employed with low reported income are especially likely to have gaps like these.

One Lost Year, in Dollar Terms

Suppose he had planned one more year at $80,000 in covered wages. That year would replace a $20,000 indexed year in his top 35, increasing the total used in his calculation by $60,000.

Social Security spreads that total across all 420 months in those 35 years to determine average monthly earnings, which is the starting point for the benefit formula. In this example, the $60,000 increase would raise that average by about $143 per month before the formula is applied.

That $143 then enters the formula, and the actual benefit would rise by less. The formula replaces a larger share of earnings for lower-paid workers, so the final boost depends on where his lifetime average lands. Whatever the increase is, it lasts for life and grows with inflation adjustments. If his top 35 years already include strong earnings, another year may make only a small difference.

Quitting Work Does Not Mean Claiming Right Away

He can leave his job at 63 and still delay claiming benefits if his savings can cover the gap. The Social Security Administration sets full retirement age at 67 for anyone born in 1960 or later. Claiming at 63 generally reduces the full benefit by 25%, and that reduction is permanent.

A weak labor market may push him toward retirement, but it does not have to determine when he claims Social Security. That decision is still his. Locking in a smaller lifetime check because of one month of hiring data is the hardest version of this mistake to reverse.

Living off savings for a few years while the benefit grows can be a sensible choice, especially for someone who expects a long retirement or has a spouse who could one day rely on survivor benefits tied to his record.

Review His Earnings Record Before Choosing a Claiming Age

His first step should be to check his Social Security record online and download his earnings history. He should look for years with zero or unusually low earnings. If his top 35 years are already strong, he may be able to stop working knowing there is little room left to improve his benefit. If gaps remain, one or two years of consulting or part-time work that pays into Social Security could help fill them.

He should then compare that record with his savings runway, meaning how many years his cash and retirement accounts can support him before he needs monthly benefits. Those two numbers should guide the claiming decision. A pension, a spouse's benefit or even one missing year can change the outcome, so the figures on his own statement should lead the way.

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Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)