(Selena Marajin)
One day, you’ll likely be among the tens of millions of Americans collecting Social Security (65 million, as of 2021). How much are you going to collect? Well, the answer to that is different for each of us, depending primarily on how much we earn in our working lives, and also largely on when we start collecting our benefits.
We can start collecting as early as 62 years old, and most people start collecting around 62 or 63 years old. However, there are good reasons not to, as well as some arguments in favor. Here’s a closer look at why you might regret claiming at 62, followed by a few reasons why it might make sense to you.
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1. You will end up with smaller checks
Most of us have a “full retirement age“when we can start collecting all the benefits we’re entitled to, based on our earnings history, and for most of us, that’s 66 or 67. For every year before your full retirement age that you collect your benefits, these will be reduced. Specifically, you will receive between 70% and 75% of your full benefits if you start collecting at age 62.
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That’s not ideal, but it’s also not as bad as it sounds; after all, while the checks may be smaller, you’ll get a lot more total. For those who live an average life, there will be little difference in total benefits received no matter when benefits begin.
2. Claiming early could mess up a smart marital strategy.
However, you should consider the big picture before deciding when to start collecting your benefits. For example, married people can get more out of Social Security by coordinating when they each start. While the two of you will enjoy two benefit checks each month, chances are at some point, one of you will be gone, and then only one check will arrive. The rules allow you to collect whichever benefit is higher. So it’s worth trying to make at least one of your benefit checks as large as possible.
A good way to maximize your benefits is to delay the start of your collection, until age 70. If the higher earning spouse delays until age 70, that can help a lower earner a lot, if he or she is the surviving spouse. in the future.
3. If you plan to continue working, your benefits may be reduced
Another consideration is whether you plan to continue working after 62 years. If you start collecting Social Security at that time and also work, if you earn more than a certain amount, the Social Security Administration (SSA) may reduce your benefits. As it explains:
If you are under full retirement age for the entire 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 above a different limit. In 2022, this cap on your earnings is $51,960. We only count his earnings up to the month before his full retirement age, not earnings for the entire year.
That may sound terrible, but once you reach your full retirement age, SSA will stop withholding benefits and recalculate your benefits, taking into account what was withheld. So you’ll get at least some of the retained benefits. Still, it may be best not to start collecting those benefits early if you plan to keep working for much longer.
On the other hand…
Despite the above reasons, are some reasons why you might want to start collecting your Social Security benefits early. For example:
- You don’t know how long you will live. If you end up waiting until age 70 to collect and then die at age 72, you won’t have gotten much from Social Security. Give some thought to your health and how long your relatives have lived. If you have a good chance of living a very long life, delaying it as long as possible may 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 simply need that income ASAP. Many of those who can afford to delay starting their benefits should delay, but if you’ve done a great job saving and investing for retirement and can afford to retire early, starting to collect sooner can have sense.
The decision of when to start collecting Social Security benefits will be different for most of us. Take some time to learn more and think about everything before you take any action, so you can position yourself to get the most out of the program.
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