There’s a reason 62 is the most popular age to file for Social Security — it’s the earliest age at which eligible seniors can begin to take benefits. And while it sometimes makes sense to start collecting Social Security as soon as you can, that move can also hurt you and your family financially. Here are a few reasons why claiming benefits at 62 doesn’t pay.
1. You’ll get more money by waiting
Your Social Security benefits themselves are calculated based on the amount you earned during your top 35 working years. However, the age at which you first file for benefits can impact your ultimate monthly payout. If you wait until full retirement age (FRA) for Social Security purposes, you’ll get the full monthly benefit you’re entitled to based on your work history. Your FRA is dependent on your year of birth, as follows:
That said, if you file for benefits before reaching FRA, you’ll lose a portion of your monthly payments for each year you file early.
If your FRA is 67, filing at 62 would knock your monthly payments down to $1,120.
And if you’re counting on Social Security to pay the bills in retirement, that could be disastrous for your long-term finances.
2. You might have some of your benefits withheld if you’re still working
Once you reach FRA, you’re entitled to your full monthly benefit, regardless of whether you happen to be working at the time. But if you file for benefits at 62, which is ahead of FRA no matter when you were born, you could lose a portion of your benefits if your earnings exceed a certain threshold. Now, that threshold changes from year to year, but for 2018, you’ll lose $1 in benefits for every $2 you earn over $17,040.
The good news is that you won’t have to forgo those benefits forever, because once you reach FRA, you’ll get them back in the form of a higher monthly payment. But if your goal in claiming benefits at 62 is to generate more income immediately, just know that you won’t get as much from Social Security as you’d think.
3. You could end up hurting your surviving spouse
Social Security is designed to help take care of not just its direct recipients but their survivors as well. However, the age at which you file for benefits could impact your surviving spouse.
If you pass away before your spouse, he or she will be eligible to collect 100% of your benefit amount. But if you file for benefits at 62 rather than wait, and lower your payments in the process, your spouse will get less money each month as well. And that could be hugely detrimental if your spouse winds up outliving you by many years.
As stated above, filing for Social Security at 62 isn’t automatically a terrible idea. If you’re laid off at that time, can’t find another job, and don’t have enough savings to support yourself, then taking benefits is a much better move than resorting to credit card debt. Furthermore, if your health is poor, it generally pays to claim Social Security as early as possible because in doing so, you’ll most likely score the highest lifetime payout.
On the other hand, taking benefits at 62 could result in both a permanent reduction of your monthly payments and a portion of those benefits being withheld if you’re still working. And if you have a spouse in the picture, you might cause him or her to lose out on lifetime income. Therefore, consider the ramifications of filing at 62 before moving forward, and make sure it’s really a better option than waiting.
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