You become eligible to start receiving Social Security retirement payments when you turn 62. Although receiving a guaranteed monthly check in the mail may appear appealing, it is best to defer claiming your benefits until later and wait a few extra years.
If you are thinking of claiming Social Security after age 62, this may come as a surprise. However, there are several compelling reasons why you should reconsider your choice if you plan to cash Social Security checks quickly.
1. Claiming at 62 might permanently shrink your benefit
A retiree’s monthly benefit is determined by how much they made in their 35 highest-earning years. However, this basic benefit is not available until you reach full retirement age. FRA is calculated based on birth year. It’s between 66 and 67 if you were born in 1956 or after.
Obviously, 62 is years before full retirement age. As a result, you must be aware that starting benefits at 62 are treated as early filing and have ramifications. The benefits shrink each month you file ahead of full retirement age, with the decrease equaling 5/9 of 1% each month for the initial 36 months and 5/12 of 1% each month if you begin benefits before then.
The first three years you have claimed benefits ahead of FRA result in a 6.7% reduction for each of those 3 years, plus an additional 5% decrease for each year prior.
2. You might also adversely affect your spouse
If you were the higher-earning spouse, your choice to start checks at 62 might result in your partner being financially harmed. This is because when one spouse dies, the other partner is entitled to keep the greater of the two Social Security payments that are paid into their home.
The longer you wait to file your benefits claim, the higher your check amount will be for each year that passes. That implies a bigger survivors benefit. However, claiming as soon as you are eligible and taking a smaller check will result in your partner losing out on a greater surviving benefit.
It might be difficult for widows and widowers to pay bills when their Social Security payments are cut from two to one after the death of a spouse. You don’t want to compound things by reducing your partner’s benefit any further.
3. You could face some restrictions on working without losing benefits
Finally, if you wanted to double-dip and get a salary while collecting Social Security, claiming benefits at age 62 will make things more difficult.
The issue is that, if you work past your FRA, you will lose Social Security benefits if you earn more than a certain limit. If your payments are suspended because of excessive earnings, they will be re-calculated at FRA; but this won’t happen until then.
For all of these reasons, delaying a Social Security claim is frequently the wisest option. The bigger your future benefit will be if you wait until FRA.