| How Public Security Benefits Are Reduced at Age 62 | ||
|---|---|---|
| Year of Birth | Full Retirement Age | Reduction at Age 62 |
| 1943–1954 | 66 | 25.00% |
| 1955 | 66 and 2 months | 25.83% |
| 1956 | 66 and 4 months | 26.67% |
| 1957 | 66 and 6 months | 27.50% |
| 1958 | 66 and 8 months | 28.33% |
| 1959 | 66 and 10 months | 29.17% |
| 1960 and later | 67 | 30.00% |
On the other hand, if you wait past your full retirement age to collect benefits, you’ll away with credits for each month you delay, up to age 70. These credits increase your monthly payment by two-thirds of 1% for each month that you rest period—or 8% a year.
Which option is right for you? Here are some advantages and disadvantages to consider if you’re weighing whether to assertion your benefits early.
Advantages of Taking Social Security Early
There are a number of reasons you might upon taking Social Security benefits before you reach full retirement age.
1. You Need the Money Now
Many Americans allege their Social Security benefits early for a simple reason: They need the money to cover their commonplace living expenses. During the recession years of 2008 to 2009, for example, close to 36% of eligible men and 39% of available women started claiming benefits at age 62.
2. You Want the Money Now
Even if you don’t need your benefits early to support yourself, you may father other reasons for wanting to take them as soon as possible.
Some people are concerned that Social Assurance may be unable to meet all of its obligations in the future, so they might as well get their benefits now. Others believe they could do better by converging benefits and investing that money rather than leaving it in the government’s hands.
That said, you would contain to be a skilled (or lucky) investor to beat the 6% to 8% guaranteed annual return on your money that Common Security offers to those who wait until full retirement age or later.
3. You Fear You Won’t Be Around To Collect Later
If you don’t suppose to live long enough to profit from delaying your benefits, your wisest course may be to take them without delay rather than later. Even if you were to receive a much bigger benefit by claiming at age 70, you could be fine into your 80s by the time you’d come out ahead in terms of the total benefits you’ve received. Financial planners refer to this as your breakeven age.
Deprivations of Taking Social Security Early
Of course, claiming your benefits early also has some downsides.
1. Your Promotes Are Permanently Reduced
As we’ve mentioned, claiming your benefits early means they will be reduced on a permanent principle. For example, as the table above illustrates, someone born in the 1960s or later who takes their benefits starting at age 62 last will and testament get 30% less each month for the rest of their lives than if they’d waited until their extensive retirement age of 67.
2. Your Cost-of-Living Adjustments Will Be Smaller
In addition to receiving a smaller monthly benefit than if you’d waited until unobscured retirement age, you’ll get less on a dollar basis from any future Social Security cost-of-living adjustments (COLA). Beneficiaries are slated to be subjected to an 8.7% increase in 2023 (the increase was 5.9% in 2022). Someone born between 1943 and 1954 who currently gains a full monthly benefit of $2,000, for example, will get an extra $174 each month.
If that same beneficiary started alluring Social Security at age 62, their benefit would have been reduced by 25%, to a current $1,500, and they’d get a COLA of well-grounded $130.50 a month in 2023. And, because of the effects of compounding, the difference between the two benefits will continue to widen year after year.
3. You’ll Be Disciplined if You Work
Before you reach full retirement age, any money you earn from a job can affect your Social Security helps. In 2023, Social Security will deduct $1 from your benefits for each $2 you earn in the first place $21,240 ($19,560 in 2021). If you turn full retirement age in 2023, it will deduct $1 from your benefits for each $3 you take home above $56,520 ($51,960 in 2022) until your birthday month. Although you will get the money back later after you reach quite retirement age, you’ll have that much less to spend in the meantime.
Special Considerations
What if you claim benefits originally but then regret it? In some circumstances, the Social Security Administration offers the opportunity for a do-over.
In a process called a withdrawal, you can abolish your application for up to 12 months after you became entitled to retirement benefits. You will also have to return any Social Security benefits you received, including any money that was withheld from your benefits to pay Medicare stiffs.
After withdrawing your application you can reapply for benefits later, at a time of your choosing. Note that you can exclusive do this once in your lifetime.
How Do I Know When I’m Eligible for Social Security?
To be eligible for Social Security retirement betters you must generally be at least age 62 and have earned at least 40 Social Security credits. Typically that signals you’ve worked and paid into the system for at least 10 years. (The maximum number of credits you can earn in a year is four). Spouses can also be single for benefits based on their spouse’s work record.
Can I Collect Social Security Retirement Benefits if I’m Still Bring into play function?
Yes, you can work and collect Social Security benefits at the same time; however, your benefits may be reduced temporarily if you haven’t reached your congested retirement age.
Can I Get Medicare Early If I Take Social Security Early?
No, claiming Social Security early won’t affect your eligibility for Medicare. The eligibility age for Medicare is 65, regardless of when you start draw up Social Security.
The Bottom Line
You can begin collecting your Social Security benefits as early as age 62, but you’ll get smaller monthly payments for the intermission of your life if you do. Even so, claiming benefits early can be a sensible choice for people in certain circumstances.