At age 62, your Social Security retirement benefits first become available. While reaching this age may seem like an exciting opportunity to start receiving monthly checks, the reality is that you likely should not get your benefits at such a young age even though you can.
So why should you forgo getting checks starting at 62 and wait longer than necessary before money comes your way? Here are a few good reasons to delay.
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You could end up with way too little retirement income
Many people rely too much on their Social Security benefits to provide retirement income. In fact, the Social Security Administration has revealed that 37% of men and 42% of women get at least half their money from Social Security in retirement. And 12% of men and 15% of women get 90% or more of their funds from this source. Often, the oldest retirees come to rely most heavily on these benefits because their savings start to run out.
Sadly, Social Security benefits aren't meant to be a sole or even primary support source. They replace only around 40% of preretirement income. Seniors are expected to have savings and ideally, guaranteed pension benefits to help cover the shortfall. The typical benefit would keep most retirees barely above the poverty level without funds from these other sources.
If you're one of the many people who will likely end up depending heavily on Social Security, try to get the biggest possible monthly payment so you can minimize your financial struggles. Claiming at 62 won't help you accomplish that. In fact, it will do the opposite.
Those who claim Social Security at a young age face early filing penalties, which reduce their standard benefit. They also give up delayed retirement credits that would raise it. A claim at the youngest possible age maximizes the penalties you face, leaving you with up to 30% less than your standard benefit and with hundreds of dollars less per month than you'd have had if you waited even longer.
Your ability to work could be affected
If you want to work and collect Social Security benefits at the same time, this could be an issue if you start getting checks at 62. That's because this age is younger than your designated full retirement age (FRA) assigned by the Social Security Administration.
If you work before hitting FRA, you could end up forfeiting all or part of your Social Security checks. If you won't reach FRA at any time during the year you're working -- which is the case if you're 62 when you claim benefits -- you lose $1 in retirement income for every $2 in earnings above $19,560. The SSA withholds entire checks to account for the money you're giving up.
Eventually, at full retirement age, your benefit amount is recalculated. But if you claim benefits at 62, you could potentially find yourself facing five full years during which you can't work as much as you want without reducing your Social Security benefit or even causing your checks to stop altogether.
You could leave your spouse with financial struggles
A claim at 62 doesn't just reduce benefits available to you. Survivor benefits are also affected.
When you pass away, your partner is allowed to keep the benefit you were getting if it's higher than the check they are personally receiving. If you were the higher earner in the relationship, claiming Social Security at 62 would have reduced your monthly payment amount. This would mean your spouse is left with less money than they'd have if you maxed out your benefits.
These are three really important reasons why you should seriously consider rethinking a Social Security claim at 62 and instead may wish to wait until your full retirement age or later to get your first payment.
