Are you thinking about starting your Social Security checks at age 62? Many people opt to claim benefits at this age because they first become available then. But you may want to reconsider your decision if that’s your plan.
Why would you want to wait and give up money that could come into your household? There are three big reasons why delayIng your claim for Social Security could be the best move.
1. Your benefit will be much smaller than it could be if you don’t delay
If you start getting Social Security benefits at 62, you’re claiming them very early. The Social Security Administration has designated a full retirement age for everyone who is entitled to benefits. Depending when you were born, your FRA could be between 66 and four months, and 67. If you start checks ahead of that time — which is the case if they begin at 62 — you get hit with an early filing penalty that reduces your standard benefit.
The standard benefit you’re entitled to equals a percentage of average wages, and the reduction to it can be pretty big if you file for benefits at 62 instead of waiting. The early filing penalties apply on a monthly basis. For each of the first 36 months before FRA, the penalties reduce your check by 5/9 of 1%. And for any month before then, an additional reduction of 5/12 of 1% is applied.
If you start checks at 62 instead of an FRA of 67, 60 months of early filing penalties apply. The ultimate reduction to your check is 30%, which means for each $100 you’d have received at full retirement age, you will end up with only $70 of it. That’s a huge decease in benefits and it could mean your Social Security doesn’t stretch very far.
2. You won’t be able to work without affecting benefits
Some people want to continue working at least part time in retirement. If you’re one of them, it may not make sense to start checks at 62. That’s because earning a paycheck before full retirement age could cause you to forfeit some or all of the Social Security payments you are receiving.
When you work at 62 while collecting benefits, you won’t hit FRA at any point during the year. As a result, your Social Security benefits are reduced by $1 for every $2 in income earned above $19,560 in 2022. This rule will apply until the year when you reach full retirement age, although the threshold at which you begin losing benefits increases annually due to wage growth. If you continue working in the year you’ll reach FRA, the rules are a bit different. Until you actually reach your full retirement age, you’d also lose $1 in benefits for every $3 above a much higher threshold ($51,960 in 2022).
Since claiming Social Security at 62 could restrict your ability to work for the next several years without jeopardizing benefit checks, there may be little reason to start getting payments so early only to lose a chunk of them anyway. While you eventually are credited back the benefits you didn’t get and your monthly payment is increased, it can take a long time for you to make up for the payments missed due to working.
3. You could doom your spouse to lower survivor benefits
Finally, claiming at 62 could result in reduced survivor benefits for your partner. These are available to married couples after one person dies.
Because of survivors’ benefits, the surviving spouse is essentially eligible to keep the higher of the two checks that were coming into the household when both spouses were alive. If you were the higher earner in your family, your checks should be bigger than your partner’s, and thus survivor benefits would be more generous than their own retirement checks. But if you shrink your monthly income with a very early claim, they’ll end up with a reduced survivor benefit, which could make it harder to cover living expenses.
For all of these reasons, claiming Social Security at 62 may be a decision you’ll come to regret. Think it through carefully before you take action and end up with less income than you or your spouse hope to have in your later years.
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