Taking Social Security Earlier than Necessary
Make no mistake: The Social Security puzzle is more complex than simply saying “Hey, I turned 62; where’s my money?”
Sure, you’re allowed to start collecting your monthly social security check that early, but unless you have a truly compelling reason to do so, it’s a grave mistake.
The money you receive at 62 is less than what you will get at what the Social Security Administration (SSA) calls “full retirement age”.
Calculating your full retirement age is a function of what year you were born (see this SSA chart), and it’s a sliding scale. For example, the SSA defines 67 years old as the age to receive full SSA benefits for those born in 1960 and later.
The SSA reduces benefits based on the number of months you start getting benefits before that magical full retirement age—and it’s quite punitive.
For example, for those born in 1955, the full retirement age is 66 and two months. They would see a reduction in benefits of 25.8% if they start taking them at 62. Even at 65, that deduction represents about a 7.8% reduction from full benefits.
Keep in mind that your annual cost-of-living adjustment (COLA) is based on your initial benefit payment, so taking it early reduces that benefit, too. Even worse, you stand to lose even more if you plan on claiming benefits on your spouse’s work record.
Bottom line: If you can afford to do so, wait until full retirement age. Waiting beyond that point is literally a bonus, as monthly benefits rise over 30% by age 70.
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