Apply for social security at age 62? You may regret that | Smart Change: Personal Finance

(Selena Maranjian)

Someday you will likely be among the tens of millions of Americans who collect Social Security (65 million, as of 2021). How much will you collect? Well, the answer is different for each of us, it depends mainly on how much we have earned in our working life and also to a large extent on when we start collecting our benefits.

We can start collecting as early as the age of 62 and most people start collecting around the age of 62 or 63. However, there are good reasons not to, as well as some arguments for it. Here’s a closer look at why you might regret claiming at 62, followed by a few reasons that might make sense to you.

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1. You will end up with smaller checks

Most of us are at “full retirement age” where we can begin to collect all the benefits we are entitled to, based on our earning history, and for most of us it is 66 or 67 years old. For each year before your full retirement age that you reap your benefits, they will decline. Specifically, you will receive approximately 70% to 75% of your benefits if you start collecting at age 62.

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It’s not ideal, but it’s also not as bad as it sounds – after all, while the controls may be smaller, you’ll be reaping a lot more, in total. For those who live an average life, there will be little difference in the total benefits received, regardless of when the benefits begin to be paid.

2. Claiming early could ruin an intelligent marital strategy

However, you should consider the bigger picture before deciding when to start reaping your benefits. For example, married people could get more out of social security by coordinating in the beginning. While the two of you will enjoy two benefit checks coming in every month, chances are that at some point one of you will leave and then only one check will come in. The rules allow you to reap whatever advantage is greater. 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 collection, until the age of 70. If the spouse who has the highest earnings delays up to 70 years, this can greatly help the lower income if he or she is the surviving spouse in the future.

3. If you intend to continue working, your benefits may be reduced

Another consideration is if you plan to continue working beyond the age of 62. If you start collecting Social Security and also work, if you earn more than a certain amount, the Social Security Administration (SSA) may reduce your benefits. As he explains:

If you are under full retirement age for the full year, we deduct $ 1 from your benefit payments for every $ 2 you earn over the annual limit. For 2022, that 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.

It may sound terrible, but once you reach full retirement age, SSA will stop withholding benefits and recalculate your benefits, taking into account what has been withheld. Then you will get at least some of the retained benefits back. However, it may be best not to start reaping those benefits early if you plan to keep working much longer.

On the other hand…

Despite the above reasons, there I am a few reasons why you might want to start redeeming your Social Security benefits early. For instance:

  • You don’t know how long you will live. If you end up waiting until the age of 70 to collect and then die at the age of 72, you won’t have gotten much out of Social Security. Think a little about your health and how long your relatives have lived. If you have a good chance of living a very long life, delaying for as long as possible might be best.
  • 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 whatever reason they simply need that income as soon as possible. Many of those who can afford to delay start collecting benefits should delay, but if you’ve done a great job saving and investing for retirement and can afford to retire early, starting early collection can make sense.

The decision on when to start collecting Social Security benefits will be different for most of us. Take some time to learn more and think carefully before taking any action so you can position yourself to get the most out of the program.

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