3 Reasons Claiming Social Security at 62 Is a Bad Idea | Smart Change: Personal Finances
Social Security is an important source of income for millions of retirees. Chances are it plays a big role in your retirement finances, too. It is important to apply for benefits at the right time, as your filing age will determine the monthly income you will receive from the program.
You are eligible for your full monthly benefit based on your earnings history at full retirement age, or FRA. If you deposit before FRA, you will get a reduced benefit.
Meanwhile, 62 is the earliest age you can register for Social Security, and unsurprisingly, it’s a popular age among seniors. But while there are plenty of good reasons to file for Social Security at age 62, here are three reasons why it might not be the best path for you.
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1. You will reduce your lifetime monthly benefits
It’s a big myth that if you apply for Social Security before FRA, your benefits will be temporarily reduced, but will then be restored to their full amount once you reach your FRA. If you file for Social Security at age 62, you’ll get a monthly benefit that’s 25-30% less than it would be at FRA. But that reduction will then stay in place permanently, leaving you with less monthly retirement income to look forward to.
Now, you can technically undo an early Social Security filing and get a higher benefit, but only if you do so within 12 months of filing and pay back all the money you received. Since the latter may not be possible, those who apply for Social Security at age 62 often have reduced benefits for the rest of their lives.
2. You might be inspired to retire early
If you sign up for Social Security at age 62, you might be tempted to leave the workforce at that time and try to live on your benefits. But retiring at 62 has consequences. On the one hand, it could mean not contributing to your savings for a few more years, thus limiting you in this regard. But it could also mean having to scramble to pay for medical coverage — or skimp on coverage and harm your health.
Although you can enroll in Social Security starting at age 62, you cannot enroll in Medicare until you are within months of your 65th birthday, and Medicare coverage itself does not begin until from 65 years old. for Social Security at age 62 inspires early retirement, it could be a bad move both health-wise and money-wise.
3. You could use up your nest egg prematurely
If you sign up for Social Security at age 62 and reduce your monthly benefit in the process, that may mean having to make larger withdrawals from your IRA or 401(k) plan each month. And that could lead to a scenario where you risk depleting your nest egg over your lifetime rather than making it last through your retirement.
Be careful when producing early
Claiming Social Security at age 62 isn’t automatically a bad idea. But it is important to recognize the negative consequences before making your decision.
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