The first reason to claim Social Security at age 62 | personal financing
The Social Security Administration gives seniors a choice about when to take advantage of benefits. They can wait until their full retirement age (either 66, 67, or somewhere in between) and enjoy their full benefits. Or they can apply sooner and collect a discounted monthly benefit.
Age 62 is the oldest age to register for Social Security. As such, it is common to apply in.
But if you claim Social Security at age 62, your monthly benefit will be reduced by 25% to 30%, depending on your full retirement age. And this is a blow you may be reluctant to take.
After all, the great thing about Social Security is that it pays you monthly interest for the rest of your life. So the smaller this advantage is, the less financial flexibility you get.
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But despite the fact that claiming Social Security at 62 would permanently reduce your monthly benefits, it’s a move that could pay off. In fact, it can end up being the most financially advantageous age to apply.
All about lifetime income
When many people think about when to claim Social Security, they focus on monthly income. This is understandable. But it’s also important to consider lifetime income when making your decision. And in the context of lifetime income, claiming Social Security at age 62 may be your best option.
While applying for Social Security at age 62 generally means accepting a lower monthly benefit for life, it also means getting many more years of benefits than you would have by waiting until full retirement age. And if you don’t end up living a very long life, you can advance financially by getting your money back as soon as possible.
So, let’s say you are entitled to $2,000 a month in Social Security benefits based on your personal earnings history at a full retirement age of 67. If you sign up for benefits at age 62, you’ll get $1,400 a month instead. But you’ll also get an extra 60 payouts for starting early.
Now, let’s say you get sick during retirement and only live to age 75. At this point, applying for Social Security at 62 would leave you $218,400 in lifetime income. Signing up for 67 will leave you only $192,000. So in this case, you’re looking at an extra $26,400 in your life by claiming benefits as soon as you can get them.
Of course, you can’t predict how long you’ll live in retirement, and in this example, the numbers look a lot different if you’re still alive in your 80s. In fact, the longer you live, the fewer applications for Social Security early in the long run.
But you don’t know how long you will live. And if you don’t want to take the risk, you may decide to get your safety with fewer monthly benefits, because that could eventually lead to more Social Security income in your lifetime.
Clearly, accepting a low monthly Social Security benefit is not an easy thing to come to terms with. And if your health is great when you retire and you have a family history of longevity, it may pay to delay your filing until full retirement age or even later (you can increase your benefits by 8% per year by deferring your previous full retirement age, until age 70). But if you’d rather not take the risk, you may find that claiming your benefits ASAP is the best way to achieve this.
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