Understanding the Implications of Filing for Social Security at 62
Understanding the Implications of Filing for Social Security at 62
Born in 1963 means reaching a significant milestone for Social Security this year - turning 62 and becoming eligible to claim benefits after years of contributions. The allure of extra income is strong, but holding off on applying could yield better financial outcomes in the long run.
The Social Security Administration assigns everyone a 'full retirement age' (FRA) based on their birth year. Once in the past, it was as low as 65, but it's now gradually crept up to 67 for those born in 1960 or later. The benefit you qualify for at your FRA is your primary insurance amount (PIA). Claiming before or after FRA leads to government-adjusted PIA increases or decreases respectively.
If you opt for early retirement (at 62), you lose 5/9 of 1% of your PIA per month for up to 36 months. After that, you lose 5/12 of 1% per month. This results in up to a 30% reduction in checks if you apply right at 62.
For instance, if a $2,000 PIA is your expectation at 67, by claiming at 62, you will end up with a measly $1,400. Over the course of a year, you lose $7,200 due to reduced payments. Contrary to belief, this reduction does not stop at 67. Instead, most people continue receiving the fewer, albeit larger checks, until death.
Delaying benefits grants you larger checks but fewer in number, further encouraging the question of optimal claiming age. Finances and life expectancy play crucial factors in this decision.
Those with limited retirement incomes can't afford to delay benefits. Prolonged delay may lead to financial hardships till the retirement age. Meanwhile, those with longer life expectancies benefit from postponing benefits, which often increases the monthly benefit by up to 124% of PIA.
Research shows most people benefit from delaying their Social Security claim as long as possible. However, ultimately, make an informed decision based on your financial circumstances and forecasted life expectancy. If you believe the 62-year-old milestone is your best option, understand the long-term implications of your decision.
Retiring at 62 might result in a significant reduction in your Social Security checks, as you could lose up to 30% of your primary insurance amount due to government-adjusted decreases. On the other hand, delaying your retirement and claiming benefits later can lead to larger monthly checks, potentially increasing your primary insurance amount by up to 124%. Managing your finances and assessing your life expectancy are crucial when deciding on the optimal claiming age for your Social Security benefits.