Here’s Why I Won’t Claim Social Security Benefits at 62 | Smart Change: Personal Finances
One of the most important retirement decisions you can make can be summed up in the titles of two classic rock songs. In 1976, the Steve Miller Band had a hit with Take the money and run. Eight years later, Van Halen scored with I’ll wait.
Many Americans choose to take the cash and run claiming Social Security benefits when they turn 62. Others prefer to wait until full retirement age, which is 67 for anyone born in 1960 or later.
As for me, I’ve always been a fan of Van Halen. Here’s why I won’t be claiming Social Security benefits at age 62.
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I completely understand why so many people choose to start receiving Social Security benefits as soon as possible. They want to retire early to do other things they would rather do than work at their current job.
However, there is a hefty penalty for claiming Social Security at age 62. For all of us born in 1960 or later, our monthly benefits will be reduced by 30%.
If I had a burning desire to fully retire, I might consider taking that big cut. But I love what I do – writing about investing and retirement planning. My goal is to have a smooth retirement by slowly reducing what I write without stopping completely.
Can I claim social security benefits at age 62 and still work? Sure. The problem, however, is that Social Security will claw back $1 of benefits for every $2 I earn above a certain threshold (which is currently set at $19,560). Even though I will be able to receive these benefits that I forfeited when I reach full retirement age, this is not an attractive scenario for me.
Admittedly, not everyone is in the same position as me. However, many people who retire early from a job find that they would like to work in another position. Even if it’s a part-time job, they could still face that same reduction in benefits.
You’ve probably heard that “a bird in the hand is worth two in the bush”. The idea is that something sure is better than something risky. And that’s arguably the biggest reason for claiming Social Security benefits at age 62.
If you apply for Social Security benefits as soon as possible, you are guaranteed to receive a monthly check. Of course, the amount will be lower than if you waited for full retirement age. However, if you delay claiming benefits, you may not live long enough to receive larger lifetime Social Security benefits.
I have high expectations for my personal longevity. Yes, I realize that a horrible accident or a dreaded diagnosis can happen at any time. But I also know that I have always enjoyed good health. I don’t engage in activities that could significantly shorten my life expectancy, such as smoking cigarettes, skydiving, or keeping an alligator as a pet.
Genetics should also be on my side. My grandparents, great-grandparents, and most of their siblings lived well beyond the average. Many of them were still relatively healthy in their 90s.
I also believe that there will be major advances in healthcare over the next two decades. Innovations in medical technology and personalized medicine could help increase the longevity of many people.
Make your own decision
Each person has their own factors to consider when deciding when to apply for Social Security benefits. The best decision for you might be completely different from the best one for me.
It’s a decision, however, that most Americans will have to make at some point. It’s not too early to start thinking about what your retirement will look like. In the words of another classic rock song, “Keep thinking about tomorrow.”
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