A lot of people sign up for Social Security as soon as they become eligible at 62, but not all of them realize that doing so comes at a cost. It shrinks your checks and it could cost you tens or even hundreds of thousands of dollars over the course of your retirement.
That doesn't mean it's a mistake for everyone. But if you regret signing up for Social Security right away, you should know there is something you can do to boost your benefits.
Why starting Social Security at 62 reduces your checks
The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. The following table can help you find yours:
Full Retirement Age (FRA)
1943 to 1954
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 and later
You must wait for your FRA to sign up if you want the full amount you're entitled to based on your work history. Beginning sooner nets you more years of benefits, but the Social Security Administration reduces your checks a little for every month you claim before your FRA.
When you sign up at 62, you only get 70% of your full benefit per check if your FRA is 67 or 75% if your FRA is 66. Every month you delay increases your benefits a little until you reach your maximum benefit at 70. That's 124% of your full benefit per check if your FRA is 67 or 132% if your FRA is 66.
Looking at this, it might seem like delaying benefits is wiser. But it depends on how long you expect to live. There's no point in delaying to 70 if you have a serious illness and don't believe you'll make it to 70. But if you expect to live until your mid-80s or beyond and you can afford to delay benefits, doing so will probably get you more money overall.
What if you already signed up at 62?
If you signed up at 62 and now regret that decision, you may be able to take it back. You can change your mind about claiming Social Security as long as it's been less than one year since you signed up and you return all of the benefits paid to you and any of your family members based on your work history. If you do this, the Social Security Administration will treat you as if you've never claimed Social Security, and when you sign up again later, your checks will be larger.
This strategy isn't feasible for everyone. You can't take advantage of it if it's been more than a year since you signed up, and some people can't afford to pay back what they've already received in benefits. Fortunately, there is another way.
Once you reach your FRA, you can contact the Social Security Administration and ask it to suspend your benefits. If you do this, you won't receive any more Social Security checks until you either request that the Social Security Administration start sending them again or you turn 70. In the latter case, your benefits will start automatically in the month you turn 70.
Doing this will earn you delayed retirement credits, which increase your future checks. Every month you delay benefits past your FRA increases your benefit by 2/3 of 1% per month, or about 8% per year.
If you do this, you won't end up with as much money as you could have had if you'd just delayed Social Security until 70 in the first place, but you can still boost your checks considerably.
Let's say you have a FRA of 67 and you signed up for Social Security at 62. You receive a $1,500 benefit per month, though that's only 70% of the $2,143 per month you could've received if you'd delayed benefits until your FRA. Had you never signed up for Social Security, you could've received $2,657 per month by delaying benefits to 70.
But that ship has sailed and now you're getting a $1,500 check per month. If you choose to suspend benefits between 67 and 70, you'd accumulate three years of delayed retirement credits, which would increase your benefits by 24 percentage points. So rather than getting $1,500 per month when you restart benefits at 70, you'd get $1,860 per month. If you live to 90, you'd collect about $32,400 more in lifetime benefits by suspending Social Security than you would if you'd continued to claim your $1,500 monthly checks.
Of course, in order to pull this off, you have to be comfortable funding retirement on your own between your FRA and 70. That's not an easy feat for a lot of seniors, though if you have substantial personal savings, it might not be a problem.
There is a middle ground, though. You could suspend your benefits for a little while and choose to restart them before 70. Every year you delay increases your benefits by 8 percentage points, and even waiting one month will help your checks a little.
A few warnings
In addition to saving for retirement on your own during the years you suspend benefits, you'll also need to pay for your Medicare Part B premiums out of pocket if you're already enrolled in Medicare. These normally come out of your Social Security benefit, but if you aren't receiving checks, the government has to charge you for your premiums directly.
Also, seniors who qualify for Supplemental Security Income (SSI) won't be able to claim these benefits if they suspend their Social Security checks. These individuals are probably better off not suspending their benefits.
There's nothing wrong with continuing to claim your current Social Security benefit if you're comfortable with it, but suspending benefits is an option worth exploring, particularly if you didn't realize you were short-changing yourself by signing up early. Play with the numbers a little and see how much suspending Social Security could help you.
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