Millions of Americans look forward to their 62nd birthdays, because that's the date when most workers become eligible to start receiving Social Security benefits. More people claim Social Security at age 62 than at any other age, and the reason's pretty obvious: Having paid into the system throughout their careers, they don't want to wait before starting to get their rewards.
Yet just because you're turning 62 doesn't mean you should automatically start getting your benefits right away. There are alternatives that could work better for some people in the long run. In particular, the following factors can play a role in what your best decision is on timing your Social Security benefits.
Are you still working?
There's no rule that says you can't claim Social Security benefits while you're still working. However, there are provisions that can result in your having to give back some of those benefits if your income is too high.
Social Security's earnings test puts limits on the amount of money you can make before you have to start forfeiting some of the Social Security benefits you've been paid. For those turning 62, the magic number is $17,040 annually, or $1,420 per month. If you've been 62 throughout 2018, then for every $2 you earn above the $17,040 mark, you'll lose $1 in annual Social Security benefits. For those who turn 62 at midyear, you'll need to compare your earnings after your 62nd birthday to $1,420 times the number of months during 2018 that you're 62, and then calculate the same reduction if your income's above that amount. For instance, if you hit 62 at mid-year and you earn $10,000 from July to December, then you'd take $1,420 multiplied by 6 or $8,520 as your baseline. $10,000 minus $8,520 is $1,480, so you'd have to forfeit $740 in benefits.
The penalty for filing early and losing benefits to forfeiture isn't as bad as it appears, because for every month of benefits you lose, you get treated as if you'd retired a month later. Yet if you're going to lose a substantial portion of your Social Security anyway, there's little reason not to just wait until you can actually keep the benefits you'll get.
Do you have multiple benefits you could claim?
Those seeking to take Social Security need also to consider exactly which benefits they're claiming. Under current law, if you file for your retirement benefits at 62 and you're also entitled to spousal benefits, you'll be automatically deemed to have filed to receive both. That usually means getting the larger of the two amounts, with your retirement benefit getting bumped up by the excess amount of the spousal benefit if your spousal benefit is the larger of the two.
If your spouse has passed away, however, then you need to be more careful. You can typically claim survivor benefits based on your deceased spouse's work record when you turn 60, while traditional retirement benefits are available at 62. Current law still allows you to claim just your retirement benefit while holding off on claiming a survivor benefit until a later date. That can work out well, as it lets you get a reduced early benefit right away while letting your future survivor benefit grow toward its full amount when you reach full retirement age.
Would you rather have more money later?
Finally, as most people know, there's a trade-off if you take Social Security at age 62. The size of your monthly payments gets reduced to reflect the fact that you'll collect for a longer period of time.
The differences can be extreme. For someone whose full retirement age is 66 and would ordinarily get a typical benefit of around $1,300 a month, claiming at age 62 can reduce your monthly payout to just $975. By contrast, if you wait until 70 to claim your retirement benefits, you'd get an increased amount of more than $1,700 per month.
Break-even analysis shows that the dollar figures even out when you hit your late 70s or early 80s. Yet for many, the simpler question is whether they'd rather wait to get a larger amount of monthly income. If the answer is yes, then holding off on Social Security at age 62 often makes sense.
Be smart with your Social Security
After a lifetime of work, Social Security is your reward in retirement. Make sure that before you just claim your benefits when you turn 62, you understand everything that's at stake. You might decide that a different decision works better for you.
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