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You should plan to claim Social Security at 62 – even if you don’t



Many older people spend years going back and forth with Social Security – in particular, trying to decide when to claim it. Signing up for benefits at 62 is attractive as it is the earliest age to apply, but if you choose this route you will significantly reduce your monthly benefit.

On the other hand, if you wait until full retirement age (FRA) to enroll, you will not experience any reduction in benefits at all. On the contrary, you will receive the full monthly benefit to which you are entitled based on your income history. FRA is either 66, 67, or somewhere in between, depending on your year of birth.

There is also the possibility of deferring benefits beyond the FRA. For each year you do, they will increase by 8%, until you turn 70, at which time you will no longer be able to increase your benefits.

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Many older people plan to apply for social security with FRA or beyond to ensure a higher monthly income throughout retirement. Yet, 62 remains the most popular age to purchase benefits. If you’re planning on signing up for Social Security later, you’re making a smart decision – at least in theory. This way, you won’t be faced with a reduction in monthly benefits which could end up hurting you. But even if you don’t want to To qualify for social security at 62, it is always advantageous to plan to do so for a great reason.

Will you be required to retire early?

Maybe your plan is to perform well until your sixties so you can apply for social security at FRA or later. But what if that choice is removed?

A shocking 48% of Americans are forced to retire early, reports the Employee Benefit Research Institute, and the truth is, you just don’t know if the same will happen to you. Layoffs may hit your business when you hit your early 60s and can’t find a replacement elsewhere. Or, it could be that health issues are slowing you down and making it difficult to maintain a full-time job. Either way, you could land in a scenario where you will be forced out of the workforce sooner than you want, and at that point you may need to apply for Social Security earlier – from 62 years old, in fact.

Of course, that may not happen. Maybe you will be lucky and your plans to claim benefits later will eventually be achievable. But it’s a good idea to assume that won’t happen and factor a reduced benefit into your retirement budget instead. This way you will know how much savings you will need to accumulate to offset.

Suppose you run the numbers and determine that you will need $ 3,000 per month to cover your living expenses in retirement. Suppose also that you are entitled to $ 1,500 per month from Social Security at an ARF of 67. This would mean that you would need enough savings to provide $ 1,500 per month, or $ 18,000 per year, of income. . Since many financial experts advise withdrawing retirement savings at a rate of 4% per annum, that means you will need $ 450,000 in your IRA or 401 (k) to give you the lifestyle. retirement plan you want.

But wait – this assumes that you will get all of your $ 1,500 per month from Social Security. If you’re forced to apply for benefits at 62, you’ll only get $ 1,050 per month instead. This means that you will now need $ 23,400 per month in savings, or a total IRA or 401 (k) balance of $ 585,000, to give yourself the lifestyle you want.

That’s why it’s important to assume that you’ll be claiming Social Security as soon as possible – even if you don’t end up being the case. This way, you will be more motivated to save more and avoid a potential shortfall.

And if you make boost your savings but still manage to claim social security later for a higher benefit? In that case, you will simply have more money to enjoy in retirement, and that’s not a bad thing.

It pays to be realistic

It’s a thing of try to claim social security from FRA or later, but it’s another thing to land in a position where it’s possible. Since almost half of seniors retire earlier than expected, it is a good idea to plan to enroll in Social Security as early as possible and establish your savings goals around a lower benefit. This way if you are able to delay the deposit, you will simply be a lot richer in your later years.

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