Much has been written about the drawbacks of claiming Social Security benefits at age 62, the earliest age at which you can start receiving Social Security retirement benefits. In many cases, though, there are good reasons to claim your Social Security benefits early before your full retirement age (FRA) of 66 or 67 (depending on the year you were born), even though you will receive a permanently lower monthly benefit. Whether doing so makes sense really depends on your personal situation, and it is important to carefully weigh the pros and cons before deciding. There are two key reasons why you may want or need to claim Social Security benefits before reaching your FRA.
One of the most common reasons – and a good one – for claiming Social Security benefits early is declining health. If you have significant health issues in your early 60s and believe you face a shortened life expectancy (the average life expectancy in the U.S. is late 70s), you can expect to come out ahead financially by taking benefits at age 62 or before your FRA. That is because by retiring at age 62, even at a lower monthly benefit, you will receive benefit checks for a longer period of time. In fact, you will receive more in Social Security benefits by claiming at age 62 than by waiting until your FRA if you die before age 77; that is the approximate break-even point at which your lifetime Social Security benefits from taking early retirement versus waiting until your FRA are equal. While the exact results depend on whether you are single or married, and on whether you or your spouse is the higher earner, claiming early Social Security benefits is worth considering if you face serious health problems.
Another good reason take Social Security benefits early is you need the money. Older workers are often forced to retire earlier than planned because of job loss, injury, or illness. And it can be extremely difficult for older workers to find suitable employment after an involuntary job loss. If you have to retire earlier than planned, Social Security benefits can serve as a financial lifeline, even at a reduced benefit. Having monthly income from Social Security will at least help pay bills and lower the likelihood of going into debt. Be aware, however, that if you continue working after starting Social Security benefits, Social Security will reduce your benefit until you reach your FRA if your earnings exceed a certain amount. For every $2 you earn above $17,640 in 2019, your Social Security benefits are reduced by $1. In the year you reach FRA, your benefits are reduced by $1 for every $3 you earn above $46,920. Once you reach your full retirement age, your Social Security benefit will not be reduced no matter how much money you earn from employment.
The Social Security Administration has calculators to help you determine your benefits and the impact of claiming benefits before your full retirement age. Visit https://www.ssa.gov for more information. And if you have questions about the right time to claim Social Security benefits, I can help. Contact my office in Jenkintown.