Exploring Three Compelling Motivations to Retire Social Security Benefits at 62
Navigating Social Security retirement benefits can be quite the conundrum. On one hand, waiting until your full retirement age or beyond to start collecting can lead to higher monthly payments. But, on the other, you might choose to claim as early as 62, even if it means smaller checks. Let's explore both sides of this coin!
The benefits of waiting
Firstly, socializing the idea that waiting is beneficial, indeed it is! When you delay tapping into your Social Security retirement benefits, you set yourself up for some meaningful perks.
If you're eligible and you hold off until your full retirement age, you'll receive 100% of your intended payments. Born in 1959? Your full retirement age is 66 years and 10 months. From 2024 onwards, it'll be a full 67 years.
But let's say you decide to wait a bit longer – up until the ripe age of 70. By doing so, you'll witness a delightful 25% increase in your monthly checks! However, be aware that once you've crossed that sweet 70-year mark, the Social Security Administration will pause its increments to your future payments.
Conversely, if you can't resist the temptation to claim your benefits earlier, you'll be in for a smaller payment. Claiming at 62 will translate into a 30% reduction in your monthly checks.
Why might you want to start early?
Now, I know what you're thinking, "Why would anyone want to cut their own earnings"? There are several valid reasons!
Firstly, maybe life has thrown you a curveball, and you're struggling to stay afloat. In these situations, Social Security benefits can serve as a lifeline, providing you with the income needed to cover your living expenses.
Secondly, there's a compelling strategic reason to start collecting your benefits before reaching your full retirement age – even if you don't need the money immediately. The fact is, you may discover a more lucrative way to put this money to work.
Let's face it, the returns on your Social Security money might not set your pulse racing, but they're still worth taking into account. Generally, the investment returns are similar to current inflation rates or US Treasury bond yields. Over the years, the yields on Treasury bonds have fluctuated, but many money market funds still manage to provide rates of return greater than what the Social Security Administration offers when it holds onto your money before your full retirement age.
Bear in mind that managing this cash can be a double-edged sword. You can find it all too appealing to keep spending the cash instead of taking the more constructive approach of investing it.
Lastly, it's also worth considering the possibility of future benefit cuts. If reduced payouts become a reality, you'll want to collect as many full payments as you can, for as long as you can, to maximize your benefits.
Working while receiving benefits is an option too, and one that might suit many people. Now, I know what you're thinking – won't working while collecting Social Security reduce my payments?
Well, yes and no. The reduction is temporary, and when you leave your place of employment or retire, your payments will be adjusted and increased accordingly. This twist effectively allows you to collect benefits while working without penalizing you for either financial decision.
So, are you ready to make an informed decision about when to start collecting your Social Security retirement benefits – at 62, your full retirement age, or even later? Don't forget to consider your individual circumstances, including your financial goals, health, and expectations for the future.
Waiting beyond your full retirement age to claim Social Security benefits could result in a significant increase in your monthly payments. For instance, someone born in 1959 would reach their full retirement age at 66 years and 10 months, and if they wait until 70, they can expect a 25% boost in their checks. However, it's important to note that the Social Security Administration will halt these increments once you turn 70.
On the other hand, choosing to claim your benefits as early as 62 comes with a trade-off. You'll receive smaller monthly checks, amounting to a 30% reduction in your payments. This early claim option might appeal to individuals dealing with financial hardships or looking to strategically invest their benefits for potentially higher returns.
Making the decision to collect your Social Security benefits earlier rather than later can be influenced by various factors. If you're in a financially precarious situation, the income derived from Social Security can serve as a valuable lifeline. Additionally, some individuals may elect to start collecting early to have the flexibility to explore more profitable investment opportunities.
In fact, the returns generated on your Social Security money, while not exceptional, might still be worth considering. Generally speaking, these returns are comparative to current inflation rates or US Treasury bond yields. The yields on Treasury bonds have fluctuated over time, but many money market funds have consistently provided rates of return greater than the Social Security Administration does when it holds onto your funds before your full retirement age.
