Advantaging from Social Security Early: Why You Should Consider Retirement at 62
Advantaging from Social Security Early: Why You Should Consider Retirement at 62
One fascinating aspect of Social Security is having the liberty to decide when to join. You can apply for Social Security as early as age 62. But to receive your complete monthly reward, you'll need to wait until the retirement age arrives in full.
The retirement age varies depending on the year of your birth. If you were born in 1960 or afterward, it's 67.
You also have the option to postpone Social Security past the retirement age and secure larger monthly payments as a result. For each month you delay your claim beyond that point, your monthly benefit increases by 0.667%, reaching a maximum at age 70.
Conversely, if you file for Social Security at 62 with a retirement age of 67, you could expect a 30% reduction in your monthly payments. This might seem tough to swallow, but there could be reasons to claim Social Security at 62 despite the financial impact.
What you might forfeit in income, you could gain in tranquility
There's a risk in not applying for Social Security as soon as eligible. Life can be unpredictable, and if you happen to pass away at a relatively young age, you might miss out on lifetime earnings by not filing at 62.
Let's say you're entitled to a monthly benefit of $2,000 at age 67. Filing at 62 will get you $1,400 a month, while delaying until 70 will earn a monthly check worth $2,480.
However, if you pass away at age 75, here's what you'll have received:- If you start collecting at 62: $218,400- If you claim at 67 and pass away at 75: $192,000- If you wait until 70: $148,800
If your health is strong going into retirement, it's reasonable to assume you won't pass away in your mid-70s. But you never know. If you'd rather not risk reducing your Social Security income, then you might consider filing at 62, even if it means accepting a smaller monthly check for life.
Take your financial situation into account as well
Of course, personal savings are another factor to consider. If you haven't saved much, claiming at 62 becomes riskier if you live longer than expected. You may need a larger monthly benefit to cover larger withdrawals from your 401(k) or IRA.
But let's say you've saved well for retirement. In that case, your financial situation might not be negatively affected by collecting a smaller monthly benefit. In fact, collecting early could help mitigate the aforementioned risk. And the smaller monthly checks likely won't hurt your finances much.
Deciding when to claim Social Security is not an easy choice. But as you make that decision, consider the impact on your lifetime earnings, in addition to the monthly benefit amount. And if you think claiming early will bring you more peace of mind, then that might just be reason enough to apply at 62.
Utilizing your savings is crucial when considering the impact of claiming Social Security at 62. If your retirement funds are substantial, a smaller monthly benefit might not significantly affect your financial stability.
In the realm of retirement finance, delaying Social Security payments past the retirement age can lead to increased monthly rewards. For every month you postpone your claim beyond the retirement age, your monthly benefit marginally increases until reaching a maximum at age 70.