Applying for social security at 62? You might regret it | Smart Change: Personal Finances
One day, you’ll likely be one of the tens of millions of Americans collecting Social Security (65 million, in 2021). How much will you harvest? Well, the answer to this question is different for each of us, depending mainly on how much we have earned during our working life – and also to a large extent on when we start collecting our benefits.
We can start collecting as early as 62, and most people start collecting around 62 or 63. There are, however, good reasons not to do so, as well as arguments in favor of it. Here’s a closer look at why you might regret claiming at 62 – followed by some reasons why it might make sense to you.
1. You’ll end up with smaller checks
Most of us have a “full retirement age” at which we can begin to receive the full benefits to which we are entitled, depending on our earnings history, and for most of us us, it’s 66 or 67 years old. For each year before your full retirement age that you receive your benefits, they will decrease. Specifically, you will receive approximately 70% to 75% of your full benefits if you start collecting at age 62.
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It’s not ideal, but it’s not as bad as it sounds – after all, even though the checks might be smaller, you’ll collect a lot more, in total. For those living an average lifespan, there will be little difference in the total benefits received, regardless of when benefits begin to be paid.
2. Claiming early could spoil a smart marital strategy
However, you should consider the big picture before deciding when to start collecting your benefits. For example, married people could get the most out of Social Security by coordinating when they each start. While the two of you will get two benefit checks each month, it’s likely that at some point one of you will be gone – and then only one check will arrive. The rules allow you to perceive the most important advantage. So it’s worth trying to make at least one of your benefit checks as big as possible.
A good way to maximize your benefits is to delay the start of their receipt – until age 70. If the spouse with the higher income delays until age 70, this can greatly help the lower income, if he is the surviving spouse. in the future.
3. If you plan to continue working, your benefits may decrease
Another consideration is if you plan to continue working past age 62. If you then start collecting Social Security and are also working, if you earn more than a certain amount, the Social Security Administration (SSA) may reduce your benefits. As he explains:
If you have not reached full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn over the annual limit. For 2022, this limit is $19,560.
In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn over a different limit. In 2022, this limit on your earnings is $51,960. We only count your earnings up to the month before you reach full retirement age, not your earnings for the full year.
This may sound terrible, but once you reach full retirement age, the SSA will stop withholding benefits and will recalculate your benefits based on what was withheld. Thus, you will recover at least part of the withheld benefits. However, it may be better not to start collecting these benefits early if you plan to continue working much longer.
On the other hand…
Despite the above reasons, it are some reasons why you might want to start collecting your Social Security benefits sooner. For instance:
- You don’t know how long you will live. If you end up waiting until age 70 to collect and you die at age 72, you won’t have gotten much from Social Security. Think a little about your health and the lifespan of your loved ones. If you have a good chance of living a very long life, it may be best to delay as long as possible.
- Maybe you can afford to retire early. Many people start collecting benefits early because they have to. They may have lost their job or for some reason just need that income ASAP. Many who can afford to delay the start of their benefits should wait, but if you’ve done a great job of saving and investing for retirement and can afford to retire early, starting to perceive early can make sense.
The decision to start collecting Social Security benefits will be different for most of us. Take the time to learn more and think about all of this before you take action, so you can position yourself to get the most out of the program.
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