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Age 62 is the earliest age you can sign up for Social Security benefits. And not surprisingly, it’s a popular age for seniors to file. That’s why it’s important to know the ins and outs of the program before you have the option to claim benefits. Here are three important rules to put on your radar.
1. Filing early will reduce your benefits permanently
Even though you’re allowed to claim Social Security beginning at age 62, doing so before full retirement age (FRA) will generally reduce your monthly benefit for the rest of your life. FRA is either 66, 67, or somewhere in between, and it’s when you can claim your complete monthly benefit based on your personal earnings history.
But for every month you sign up for Social Security ahead of FRA, your benefit takes a hit. And if you have an FRA of 67, filing at 62 will result in a 30% reduction to your benefit.
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2. Claiming benefits early could leave your spouse with less money
When you’re single, the Social Security decisions you make can be based on your personal needs and no one else’s. But when you’re married, those choices become more complicated.
Spouses who aren’t entitled to a benefit of their own can’t sign up for benefits until their partner does. And so that might influence your decision of when to file.
Another thing you should know is that once you pass away, your spouse will be entitled to survivors benefits. That will amount to the same benefit you were entitled to while you were alive. And so if you claim Social Security early and reduce your benefit in the process, you’ll end up leaving your spouse with what could be a much lower income stream for life.
3. Filing early while working could result in withheld benefits
You’re allowed to work and collect Social Security simultaneously. But if you do so before reaching FRA, you could end up having some of your benefit withheld if you make too much money.
This year, you can earn up to $19,560 without impacting your benefit. But if your earnings exceed that limit, you’ll have $1 in Social Security withheld for every $2 in income.
That limit is much higher ($51,960) if you’ll be reaching FRA this year but aren’t there yet. And beyond that limit, you’ll only have $1 in Social Security benefits withheld for every $3 you earn.
But remember: Whenever you sign up for benefits before reaching FRA, you slash them in the process. And that might not be worth doing if you’re working and earning enough income to subject yourself to withheld benefits.
Not everyone who’s entitled to Social Security signs up at age 62. But it’s a good idea to familiarize yourself with the program’s rules before reaching that point. And so if you’re nearing your 62nd birthday, it pays to spend some time reading up on Social Security so you can make savvy decisions that serve you — and, if applicable, your spouse — well during retirement.
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