As early as age 62, you can begin receiving Social Security benefits. However, if you begin receiving payments before you reach full retirement age, which is typically age 66 or 67, your benefit amount will be decreased.
If you start receiving Social Security benefits at age 62, your payouts will be 25% lower if you reach full retirement age at 66 and 30% lower if you reach full retirement age at 67. There are various benefits to delaying Social Security benefits, but there are also some good reasons to begin receiving benefits as soon as feasible.
Typical justifications for beginning Social Security at age 62 include:
Right now, you require extra money.
Pay off your debt.
Utilize stock market leverage.
Plan your payments with your spouse.
Taking Social Security can be a smart move if you have any major health issues and your doctor predicts you won’t live much longer than the next few years. According to Glen Goland, a senior wealth strategist at Arnerich Massena, a financial advisory firm in Portland, Oregon, “you may be better suited filing at 62 so you get as many monthly benefit checks as you can if you are 62 and a medical condition renders you unlikely to live to age 75.”
However, if you’re married and receive higher Social Security benefits than your spouse, you might wish to postpone taking your benefits so that you might give your spouse a larger survivor’s benefit.
You require additional funds right away.
It may make sense to apply for Social Security early if you have gone through a financial hardship, like a layoff or significant expense, and you are at least 62 years old. The money could likewise be put to use beginning your subsequent stage of life. Taking cash out of Social Security can be a smart move if you need the money to launch a new business, according to Jody D’Agostini, a certified financial adviser at Equitable Advisors in Morristown, New Jersey. “This money boost can assist you until you get off the ground and may help you establish your next chapter of earnings.”
You can refund your Social Security benefit without incurring penalties if you are able to recuperate some of the money within the first year, which will allow your future Social Security payment to accrue.
Get Debt Free
Consider receiving your Social Security benefits sooner if you have debt that needs to be paid off and are unable to boost your earnings or access your savings. That’s especially true, according to D’Agostini, if your interest rates are ballooning. “However, I would try to consolidate the debt first and seek for ways to reduce interest rates.”
Invest the earnings
For every year you wait between the time you reach full retirement age and age 70 to file for Social Security, your payment will automatically increase by 8%. If you believe you can earn more money through other investments than that, you may be able to increase your financial rewards by taking early Social Security and investing the money. According to Levon Galstyan, a certified public accountant at Oak View Law Group in Glendale, California, “you could withdraw your Social Security payments early, invest the money in the stock market, and beat that 8% yearly return.” However, it’s crucial to keep in mind that Social Security benefits will inevitably rise over time, whereas stock market investments may lose value.
Organize payments with your partner.
If you are married and both of you are eligible for Social Security benefits, it is frequently logical for the larger earner to postpone filing while the lower earner begins receiving benefits sooner. The pair will typically benefit the most if they take action to maximize the benefit of the higher earner.
Devin Carroll, owner of Carroll Advisory Group in Texarkana, Texas, says that if your spouse’s wages were higher than yours, then it is possible that their Social Security payment will be bigger than yours. “If they have a shorter life expectancy and are also in bad health, the larger benefit they receive will probably become your benefit when they pass away.”
Married couples have the option to apply for spousal benefits, which can equal up to half of the benefit of the higher earner. The higher of the two Social Security payments that a married couple received will also be given to the surviving spouse. If that is the case, Carroll argues that there is little need to put off receiving your benefit for years in order to receive a greater benefit for the rest of your life since you will most likely begin receiving the survivor’s benefit at some point in the future.
The optimal ages to file for Social Security benefits as a couple should be calculated specifically for your situation. The sort of funds you have and other sources of retirement income, for example, will play a significant role in your selection, according to Carroll. In order to determine whether filing earlier or later results in a better overall outcome, retirees need analyze all the relevant criteria together.
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