Here’s Why Not Claiming Social Security Benefits at 62 | Smart Change: Personal Finance
One of the most important retirement decisions you’ll ever make can be summed up in the titles of two classic rock songs. In 1976, Steve Miller’s band was a huge success Take the money and run. Eight years later, Van Halen scored with I will wait.
Many Americans choose to take the money and run by claiming Social Security benefits when they turn 62. Others prefer to wait until their full retirement age, which is 67 for those born in 1960 or later.
For me, I’ve always been a fan of Van Halen. Here’s why you shouldn’t claim Social Security benefits at age 62.
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I totally 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 prefer rather than work at their current job.
However, there is a heavy penalty for claiming Social Security at 62. For all of us born in 1960 or later, our monthly allowance will be reduced by 30%.
If I had a burning desire to retire fully, I might consider making that big cut. But I love what I do – write about investing and planning for retirement. My goal is to ease into retirement by reducing how much I write without stopping completely.
Can I claim Social Security benefits at age 62 and continue working? surely. The problem, however, is that Social Security will refund $1 in benefits for every $2 I earn above a certain threshold (which is currently set at $1,560). Although I will be able to receive those lost benefits when I reach my full retirement age, this is not an attractive scenario for me.
True, not everyone is in the same position that I am. However, many individuals who retire early from one job find that they want to work in another. Even if it’s part-time, they can still face the same reduction in benefits.
You may have heard that “a bird in the hand equals two in the bush.” The idea is that something that is certain is better than something that involves risk. It is arguably the main reason for claiming Social Security benefits at age 62.
If you claim Social Security benefits as soon as possible, you will almost certainly receive a monthly check. Of course, the amount will be less than if you wait until your full retirement age. If you stop claiming benefits, there is a chance that you will not live long enough to receive larger lifetime benefits from Social Security.
I have high expectations for my personal longevity. Yes, I realized that a terrible accident or a frightening diagnosis could come at any time. But I also know I’ve always enjoyed good health. I do not participate in activities that could significantly shorten my life span, such as smoking cigarettes, skydiving, or keeping a pet alligator.
Genetics should be on my side, too. My great-grandparents, great-grandparents, great-grandparents, and most of their siblings have lived beyond average lifespans. Many of them were in relatively good health well into their 90s.
I also believe that there will be significant advances in health care over the next two decades. Innovations in medical technology and personalized medicine could help increase longevity for many people.
Make up your own mind
Everyone has their own factors to consider when deciding when to claim Social Security benefits. The best decision for you may be very different from the best decision for me.
This is a decision, though, that most Americans will need to make at some point. It’s never too early to start thinking about what your retirement will look like. And in the words of another classic rock song, “Don’t stop thinking about tomorrow.”
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