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Social Security Matters: Ask Rusty – About the virtues of claiming benefits early

by AMAC Certified Social Security Advisor Russell Gloor, Association of Mature American Citizens     

Dear Rusty: It seems like we are always encouraged to wait until our full retirement age or age 70 to claim our Social Security. For me, benefits at age 62 were a good jump start to my retirement. How about listing the many benefits to early (age 62) retirement? And at what age does it become a liability, if ever? Signed: Happily Retired at age 78

Dear Happily Retired: You’re correct that most financial advisors and Social Security Advisors, including me, frequently encourage people to delay claiming Social Security until at least their full retirement age (FRA). And that’s because far too many claim their benefits as soon as they are available at age 62 “because it’s there,” without evaluating whether that’s a smart move for them personally. There are many reasons why it’s best to wait, but there are also some very good reasons for claiming benefits at age 62. Let’s explore those.

Claiming at age 62 is exactly the right move if you are in poor health and don’t expect to live a long life. Benefits taken age 62 are 25% less for those with a full retirement age (FRA) of 66, and 30% less if your FRA is 67. But those reductions become insignificant if you don’t expect to live a long, healthy life from that point forward. If you wait until your FRA, it takes about 12 years to collect the same amount in total benefits as if you had claimed at age 62.

Even if you are in decent health now, if your family history and your lifestyle suggest less than average longevity, claiming before your FRA, as early as 62, may be a prudent choice. By “lifestyle” I mean, for example, whether you exercise regularly, smoke or drink excessively or drive without a seatbelt. There are several life expectancy calculators available which can assist with predicting your life expectancy by evaluating your family history and lifestyle, including those available at this website: https://socialsecurityreport.org/tools/life-expectancy-calculator/. Just remember that no one can accurately forecast how long they will live but making an informed decision on when to claim should consider your estimated longevity, among other things.

If collecting your Social Security benefits early is needed to help pay for life’s necessities, such as food, housing, and out-of-pocket medical costs, then claiming as early as age 62, or any other time before your FRA, could be exactly the right choice. In other words, the need for the money now is a driving force in deciding when to claim.

Which brings me to your point that claiming at age 62 was a “jump start” to your retirement, allowing you to begin enjoying your golden years much earlier than you might have otherwise been able to. There’s a lot to be said for taking benefits early to fulfill your bucket list while you’re still young enough to enjoy it. And, from your signature, it looks like you’ve been putting that extra Social Security money to good use for many years now. Good for you! Now, at age 78, you’ve reached your “breakeven point” where, if you had waited until your FRA to claim, your cumulative lifetime benefits would hereafter be more than they will be because you claimed at 62. That may not, however, offset the many years of happy retirement you’ve been able to enjoy because you took your benefits early.

In the end, deciding when to claim Social Security should be done after carefully evaluating your personal situation. Anyone who claims benefits before their full retirement age must beware of Social Security’s “earnings test” which limits how much you can earn before your benefits are affected. But those who can afford to wait and who expect to live to a ripe old age would do well to consider delaying until their full retirement age, or even beyond, to claim their Social Security benefits. If their life expectancy is at least “average” they’ll collect much more in cumulative lifetime benefits by doing so.

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