Are You Making a Large Mistake By Taking Social Safety at 62?


Olena Yakobchuk /

Editor’s Note: This story originally appeared on The Penny Hoarder.

As your 62nd birthday approaches, you face a big decision: should you start paying social security at 62 and accept lower benefits? Or should you defer social security to get a higher benefit amount?

Whether you will join social security at the age of 62 depends on several factors: your life expectancy, whether you will retire early and your overall financial situation.

Here are some things to consider when planning your retirement.

This is how early use of social security works

A padlock on social security cardslarry1235 /

If you make social security claims based on your own documents or receive a spouse’s allowance, if you can receive earlier benefits from the age of 62, you will be confronted with a lifelong benefit reduction.

Your social security benefits are based on your primary insurance amount. This is the amount you would receive if you started your benefits at retirement age. If you were born in 1960 or later, your full retirement age is 67. Otherwise, the full retirement age ranges from 66 years for those born in 1943 to 66 years and 10 months for those born in 1959.

Every time you receive social security benefits before your full retirement age, you will have to accept a reduced benefit. Your performance will decrease by 6.66% for each year of early performance. If you start at the earliest eligible age of 62, your benefits will be 30% lower than if you wait until you reach normal retirement age.

However, if you persevere past full retirement age, you will receive deferred pension credits. These amount to 8% per year until your social security benefits expire at the age of 70. If you wait until you are 70, your monthly benefit will be 77% higher than you would if you were 62.

Here are the maximum social security benefits in 2022:

  • From 62 years: $ 2,364
  • From 65: $ 2,993
  • From 66: $ 3,240
  • From 67: $ 3,568
  • From 70: $ 4,194

It makes sense to receive social assistance at the age of 62

Social security paymentAlexey Rotanov /

Deciding when to get your Social Security retirement benefits is one of the biggest personal financial decisions you will ever make. However, you can start benefiting from the age of 62 in the following situations.

If you have any health problems

Monkey Business Pictures /

If you are in poor health or your parents died relatively young, it often makes sense to apply early. Your social security contributions will be lower, but early access can result in higher overall lifetime benefits.

However, be aware that your life expectancy is difficult to predict. Even if your health isn’t perfect, there is a good chance that you will live longer than you predict. According to the Centers for Disease Control, someone who turned 65 in 2019 could live to be 19.6 on average. Surviving your money is a far greater risk than leaving money on the table.

When you have an urgent financial need

Elderly woman drinking coffeeInside Creative House /

The irony of social security is that the people who are most dependent on it often cannot afford to receive a larger monthly benefit. Many older employees have to retire early because of health problems, layoffs or care obligations. Social security income can be a lifeline in these situations.

If delaying Social Security pension payments would put you in debt, filing early claims is a wise decision. Even if a delay in social security would mean you forego health insurance or medical treatment, you don’t want to wait.

When you don’t plan to work

Elderly man working on a laptopMonkey Business Pictures /

If you receive social security benefits while working before full retirement age, your monthly benefit will be reduced if your salary exceeds certain limits. In 2022, Social Security will reduce your benefit by $ 1 for every $ 2 you earn over $ 19,560.

In the year you reach full retirement age, the annual limit is $ 51,960 and Social Security only withholds $ 1 for every $ 3 you earn over that amount. Once you reach full retirement age, there is no longer any need to worry about a benefit cut – the cut ends at that point.

But you’re not permanently giving up the money you lose every year in cuts. When you reach normal retirement age, the Social Security will charge you a higher amount to give you the withheld funds.

It is true, however, that due to the temporary reduction, it is often not worth drawing early access to social security if you are still gainfully employed.

When should social security receipt be postponed?

Senior no no shaking fingers grandmaAndrii Iemelianenko /

It is obvious that there are many guesses as to when to draw social security benefits. If these circumstances apply, it is advisable to wait to receive the benefits so that you can collect more money every month.

When your health is excellent

Elderly men playing tennissirtravelalot /

With an above-average life expectancy, it usually does not make sense to take advantage of benefits early. In recent years, the Cost of Living Adjustments from Social Security (COLAs) have lagged far behind the real cost of living increases for seniors.

Although rising inflation pushed Social Security COLA down to 5.9% in 2022, it hovered around 1 or 2% for most years. Starting with an already reduced performance makes it difficult to keep up.

If you expect to live well into your 80s or 90s, waiting is often the best step to take. Every year if you wait past 62, your checks will increment 6.66% until you reach full retirement age. After that, they increase by 8% until you reach maximum output at the age of 70.

When your spouse will make your claim

Senior couple at homeKzenon /

When you’re married, you can’t just think about your own social security pension benefits. You need to consider how your decision will affect your spouse.

It often makes sense for the higher-income spouse to wait, especially if they are significantly older than the poorer-earning spouse. If the high-wage earner dies before the low-wage earner, the lower benefit can be transferred to the higher survivor benefit. The widowed spouse can receive up to 100% of the benefits of the deceased spouse.

When you postpone retirement

Woman making potteryBGStock72 /

If you are still able to work and enjoy your job, postponing social security is a good strategy. Of course, if you don’t retire early, you can get greater benefit.

However, by earning a paycheck, you can avoid withdrawing money from your 401 (k) or individual retirement (IRA) account, which gives your money more time to top up.

Can you reverse your decision to apply for social assistance?

Confused elderly womanmichaelheim /

There are two ways in which you can reverse your decision to receive social security pension benefits.

  • You can withdraw your application: If you got Social Security early and it was less than a year ago, you can fill out Form SSA-521 to withdraw your application. You must repay to Social Security any benefits you received, along with any withheld taxes or Medicare premiums. When you are ready to resume services, you will need to reapply. Then you are entitled to a higher benefit based on your age at that time.
  • You can suspend your benefits when you reach full retirement age: If you have reached full retirement age but want to earn those 8% late retirement credits, you can contact your local Social Security Office and request that your benefits be suspended. For example, if you suspend your benefits at 67 and resume at 69, your payments will increase by 16%. Your checks will automatically resume when you turn 70 if you don’t restart them sooner.

As you can see, your options for undoing your retirement are very limited. If you are unsure how to proceed, be sure to speak to a financial advisor before doing your first social security check.

Disclosure: The information you read here is always objective. However, sometimes we get compensation when you click on links in our stories.

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