Age 62 is the earliest age at which you are able to start receiving Social Security retirement benefits. However, the decision requires careful consideration as it permanently reduces your monthly payment amounts and can impact total lifetime benefits. Here’s what to consider before claiming early Social Security retirement benefits at age 62, or any time before you reach your Full Retirement Age (FRA), which is generally age 67.
Reduced Personal Benefits
Claiming Social Security benefits anytime between age 62 and your FRA will reduce your lifetime benefits. Your monthly benefit will be permanently decreased, possibly by up to 30%. A reduction in your benefits can create a significant impact over the years.
Reduced Marital and Survivor Benefits
Your decision to claim benefits between age 62 and your FRA will also reduce future potential benefits from your spouse. These include spousal benefits during your spouse’s lifetime if his or her benefit is materially higher than yours, as well as potential survivor benefits if your spouse predeceases you.
Income Limits
Another factor that may impact your decision is if you plan to work while receiving benefits before your FRA. If so, your benefits will be reduced by $1 for every $2 you earn over the annual earnings limit, until you attain your Full Retirement Age.
If your monthly benefit is reduced in the short term due to your earnings, your future benefit will be adjusted higher when you reach your FRA. However, your monthly benefit will still be lower at that time versus had you delayed receiving benefits until your FRA or later. Additionally, the risks of receiving lower spousal or survivor benefits will still apply.
Delaying Social Security Retirement Benefits
The election to defer your Social Security benefits to your FRA or up to a maximum age of 70 alleviates the impacts and risks noted above. The decision also materially increases your future benefits by up to 8% per year. These increases can have a dramatic positive impact on your long-term financial security.
When to Consider Claiming Social Security Benefits Early
Life factors can make the decision to begin benefits early the appropriate decision for you. These primarily include:
- Reduced Life Span
The benefit of deferring your benefits is contingent upon your lifespan as you forfeit benefits at earlier ages. If you expect a shorter lifespan (perhaps due to an illness), electing early benefits could be more advantageous.
- Inability to Support Your Financial Needs
Another reason to commence your benefits now is if you do not have enough current income or savings to support your needs. In such a case, beginning benefits could be essential.
SageVest Wealth Management understands that your wealth acquires new meaning as you approach and enter retirement. Our customized retirement planning includes a range of ‘what if’ scenarios to help ensure that your financial and life priorities remain aligned as you near and enjoy retirement. Please contact us for more information.
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