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Think You're Ready for Social Security? Not Until You Read This

By Jason Hall - Oct 21, 2017 at 6:47AM

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Ignoring even one of these things could hurt the quality of your retirement. Make sure you've considered how they could impact you.

If you're between the ages of 62 and 70, you can take Social Security retirement. And depending on your situation, now might be the perfect time to do so. However, it's really important to review some critical things that could make now the wrong time to claim your benefit. 

This includes your health, wealth, other sources of income, and how a few things can compound and really impact your retirement. Keep reading to make sure you're truly ready before you make the call to claim your Social Security benefit. 

Older couple arm in arm walking on a beach.

Image source: Getty Images.

Will you outlive your other retirement savings if you claim too early?

If you're considering taking Social Security soon, you're probably close to age 65 or over. Some important statistics to consider first:

  • The average 65-year-old American will live beyond age 80.
  • 40% of single and 20% of married 65-plus Americans get 90% of their income from Social Security. 
  • The median 65-plus American has less than $61,000 in their 401(k)
  • Your Social Security benefit is cut as much as 6.67% for every year you claim early. 
Smiling older couple stand under an umbrella in the rain.

Image source: Getty Images.

The most popular age to claim Social Security is 62. Unfortunately, far too many of those who claim early don't have enough retirement savings to offset the benefit cut if you claim before your full retirement age. When this is paired with life expectancies for men and women that have most of us living into our 80s, it makes it far more likely that you'll run out of money and be wholly dependent on your monthly Social Security check late in life, just when your care needs could be at their highest and most expensive. 

Plan to keep working? Not so fast

Plenty of early Social Security filers plan to continue earning a paycheck for at least a few years before fully retiring. However, there's a big fat catch that could backfire on you. If you claim Social Security before you reach your full retirement age (between 66 and 67 depending on when you were born), there is a relatively low cap to how much you can earn before your Social Security check starts getting cut

Older man with surprised look on his face reads a bill.

Don't get a surprise cut to your Social Security check by earning too much money. Image source: Getty Images.

For 2017, every $2 you earn above $16,920 will cost you $1 in Social Security payments. Here's how that looks in plain math: If you earn $26,920 this year ($10,000 above the earnings limit) and haven't reached full retirement age, your Social Security benefit will be cut by $5,000. 

There's plenty of reason why it could make sense to work some after taking Social Security. Just make sure you understand the income limits before taking an unexpected hit to the income you were expecting to get. 

How will you pay for healthcare?

Older man doing rehab exercise with a nurse.

The older you get, the more healthcare you need (and the more it costs). Image source: Getty Images.

You can start Social Security retirement at 62, but you probably won't be eligible for Medicare before age 65. With healthcare costs rising and private insurance cost-prohibitive for many people in many places, the loss of employer-sponsored group coverage could make health insurance far more expensive than you think. That's before the impact of the Trump administration's recent decision to end cost-sharing reductions that provided nearly $9 billion in funds to support insurance costs for lower-income Americans. 

All of these things combined could make a huge impact

Older man and woman dressed for work with frowns.

Image source: Getty Images.

When you factor in higher healthcare expenses, caps to how much you can earn before your benefit starts getting cut, and the risk of outliving your retirement savings and other financial assets, there are plenty of reasons why filing right now might be a big mistake. That's certainly the case for many Americans (many of whom will still file early). 

Retiring as early as possible might sound great, but it could cause years of pain later in life. Instead of taking Social Security now just so you can retire early, you might be far better off waiting a little longer so that you can retire well. 

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