Why Not Claim Social Security at 62?

Orange City Iowa Estate Planning

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Retirees have a choice about when to claim their Social Security retirement benefits, but for most people, 62 is the earliest age at which you can start them.

If you’re getting close to age 62 and thinking about filing for social security benefits, there are a few things you need to know before you act, so you don’t later regret your choice.

  1. You outlive your life expectancy. Social Security is designed in theory for you to get the same income over your lifetime, no matter if you begin getting benefits early, claim them late, or start them on time. Early filers receive more but smaller checks, because of early filing penalties. Late claimers get fewer and bigger checks, because they don’t claim them until they’re older. However, everyone dies on schedule, and if you outlive your projected lifespan and you claimed Social Security at 62, each month you live beyond your life expectancy, is a month in which you miss out on extra income. Your total lifetime benefits could end up much larger, if you receive a lot of checks beyond the point when you would’ve broken even for delaying benefits.
  2. Your medical care is too expensive. Medical care is very expensive for many retirees. There is out-of-pocket spending for Medicare premiums and prescription drug costs that aren’t covered. Many of these substantial healthcare costs are incurred late in retirement, when your health has started to decline. Unfortunately, for many, their investment account balances are low at this point after years of withdrawals. If you find that your savings are running short and you can’t afford costly care, you may regret that you claimed your money early and minimized the amount of your Social Security checks.
  3. Your spouse winds up with lower survivor benefits. If you’re the higher-earning spouse, taking your Social Security benefit may potentially result in leaving your spouse in a pinch if you die first. That’s because filing at 62 would mean lower survivor benefits. You should think about the effect on your spouse if you file benefits ahead of schedule.

Ask an attorney to work the numbers for you. For married couples, it’s frequently better for the lower earner to begin their benefits early if the money is needed for household income.  The higher earner can then wait to claim benefits as long as possible—ideally to age 70—to maximize the survivor benefits.

Take your time and think carefully about when to claim benefits. You don’t want to regret your choice, especially if it’s at 62.

Once you claim your Social Security benefits early, your income is going to be smaller for the rest of your life, unless you can undo your claim. You don’t want to look back and wish you’d waited or regret not considering all of the ramifications of starting benefits at 62. Even so, you may determine that claiming right away at age 62 still makes sense. However, understand the negatives before you make this choice.

Reference: Motley Fool (Aug. 17, 2020) “3 Reasons Retirees May Regret Claiming Social Security at 62”

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