Should you start receiving Social Security benefits as soon as possible, ie, at age 62? That’s the question we want to address here.
First, some important details.
Social Security considers “full retirement age” to be 66 for people born between 1943 and 1954.
For Baby Boomers born between 1955 and 1960, the “full retirement age” increases in two-month increments: 66 and 2 months (for those born in 55), 66 and 4 months (for those born in 56), 66 and 6. months (for those born in 57) and so on until it reaches 67. For anyone born in 1960 or later, that (ie 67) is considered “full retirement age”.
However, Social Security will allow you to start receiving has been reduced Social Security benefits until your full retirement age, starting at age 62.
Don’t miss that important detail. You will receive a discounted amount. The fact that Social Security gives you your money “early” means they will reduce the payment.
But even though the amount will be less, there are still some compelling reasons to consider “joining” Social Security at age 62. Here’s 11:
1. If you are married, have one lower Social Security benefits, and lots of them younger than your husband…
Life expectancy tables suggest that you will outlive your spouse and at some point draw on the Social Security spousal benefit when your spouse dies. In that case, it might make sense for you to go ahead and join your benefit early so you can start collecting what you can now, as the increase in your benefit won’t make much of a difference, especially when you eventually join a spousal benefit;
2. If you are concerned about the future of Social Security…
If you’re worried that Social Security will run out of money by 2035 (the current estimate) or somehow cease to be a viable program, it makes sense that you’d want to connect your benefits early to collect them while you can. :
Politicians are always talking about making changes to Social Security to keep it viable. Most likely, those changes will be negative. So, if you think you want to collect “what you can while you can,” turning on Social Security at 62 may be an option for you.
3. If you think that by waiting too long to get a higher benefit, you might die before you get anything…
I know many people want to delay benefits so they can maximize the amount they will receive each month. Let’s say you plan to wait until age 70 so you can claim the largest possible benefit. But if you die before your 70th birthday, you will not get any the benefits.
Now, obviously, no one knows when they will die. But you can look at your health and your family history and make an educated guess. This may be a reason to join Social Security earlier so you can receive benefits. Waiting too long and possibly not receiving any benefits at all may prompt you to start your Social Security benefits early.
4. If you have debt to pay off…
Depending on how much debt you’ve accumulated and the interest rate you’re paying, it may make sense to get extra cash now to pay off your debt. Again, by joining Social Security earlier, you’ll receive less each month than you would if you waited until full retirement age. But if you can get debt to zero, especially high-interest credit card debt, that could be a good reason to turn on Social Security early.
5. If you can no longer work…
You may have plans to work all the way to age 70 and then take Social Security, but for some reason you can no longer work.
Maybe you got fired? Maybe you have a health problem. But whatever the reason, you just can’t work anymore and need to turn it on soon to make ends meet. This may be less about your choice and more about the fact that you just have to turn it on. That may be a good reason.
6. If you work part-time and your income is below the earnings limit…
For 2023, if you were below full retirement age, you could earn up to $21,240 a year and not lose your Social Security. If you earn more than that, they give you a fancy two-for-one special. That is, for every two dollars you exceed that income limit, you will lose one dollar of your Social Security benefit.
Once you reach your full retirement age, you can earn whatever you want and Social Security will not reduce your benefit. If you only work part-time and you’re sure you’ll be below that limit, you can turn on your Social Security before full retirement age.
7. If you already have your highest earning 35 years…
Your Social Security benefits are based on the 35 years of earnings in which you received the most compensation. If you’ve already had 35 years of peak earnings, and perhaps you only work part-time and therefore don’t exceed those peak earnings, you can turn it on early.
However, there is this. If you only have 30 years of compensation at age 62, they’ll add five years of zero to your average. It may force you to work longer or delay joining Social Security. But if you already have 35 years of high earnings, it may make sense to connect your benefits early.
8. If you want to get it and invest it (and think you can do better than social security raises)
There is an 8% annual increase from full retirement age to age 70. That’s pretty strong. However, as we said earlier, if you never turn on Social Security because you die before receiving any benefits, your beneficiaries will receive nothing. If you think that by turning it on early and investing it, you think you can earn more, this can be a strategy.
Another benefit of this strategy is that if you die, the money in your investment account will remain with your beneficiaries. However, again, if you die without ever being on Social Security, your beneficiaries will be left with nothing. For some, that might be reason enough to do it right there.
9. If you are single and have health problems…
You can calculate and figure out your Social Security deferral endpoint. But if you’re not sure you’ll live that long, turn it on early and reap the benefits now may make sense to you.
10. If your husband higher meritorious and has health problems…
Because they earn more, that means their Social Security benefit will be higher than yours. If they are also in poor health and potentially have a shorter life expectancy, that means their higher benefit is likely to become your benefit when they die.
If that’s the case, there’s not much reason for you to delay your allowance. You can go ahead and plug it in and collect Social Security as long as you can before Your benefit will be increased to the survivor’s benefit after your spouse’s death.
11. If your spouse has a lower income than you and is older…
Let’s say your spouse is at full retirement age and can tap into his own Social Security and receive $500 a month. Let’s say you’re 62, and if you compound your benefit, it would be $1,800 a month. By connecting your benefit, it now allows them to receive a spousal benefit and at their full retirement age they will be able to receive $900 a month based on your benefit, as opposed to $500 a month based on their own benefit. Allowing an older, lower-income person to start spousal benefits may make sense for you to go ahead and file earlier.
Some people have no choice. They have to apply for Social Security just to make ends meet. Other people do have choices, and the only question is when is the best time to turn on Social Security.
Everyone’s situation is different. This is one of the huge benefits of working with a financial planner. He can show you different strategies for getting your Social Security on. Depending on your situation, your monthly income, the assets you have will all affect your decision about when to take Social Security.
Mel Stubbs is a financial planner and educator at Christy Capital who works with federal employees across the country, teaching them how their retirement system works and how to plan for retirement using their available benefits.
© 2023 Mel Stubbs. All rights reserved. This article may not be reproduced without the express written consent of Mel Stubbs.