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3 Terrible Reasons to Claim Social Security at 62

By Katie Brockman - Jan 30, 2021 at 6:06AM

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Claiming benefits for the wrong reasons could spell disaster for your retirement.

Age 62 is the earliest you can begin claiming Social Security benefits, and it's also the most popular age to file, according to a report from the Center for Retirement Research at Boston College.

By claiming at age 62, your benefits will be reduced by up to 30% each month for the rest of your life. In some cases, it's not a bad idea to claim benefits as early as possible, despite the smaller checks. However, it's important to make sure you're claiming early for the right reasons. If you're choosing to take Social Security at 62 for any of these reasons, you may want to rethink your decision.

Older man sitting on a couch, looking worried

Image source: Getty Images.

1. You're worried Social Security will go bankrupt

It's true that Social Security is experiencing some financial challenges. But the program isn't going bankrupt or on the verge of collapse. If you're claiming early because you're worried Social Security will be going away soon and you want to get your money while you can, you may end up hurting your monthly payments over the long run.

Right now, the Social Security Administration (SSA) is relying on its trust funds to pay out a portion of retirees' benefits. Those trust funds are expected to be depleted by 2034, and when that happens, the SSA will need to rely primarily on payroll taxes to fund the program. Those taxes will only be enough to cover around three-quarters of projected benefits, though. This means that unless Congress finds a solution relatively soon, future benefits could be slashed by around 25%.

When you claim benefits at age 62, your monthly payments will already be reduced by up to 30%. Then if your benefits are cut by another 25%, that can make it significantly more challenging to make ends meet in retirement.

2. You're just tired of working

When you've been working for decades on end, it can be tempting to take Social Security at age 62 and retire as soon as possible. That's not necessarily a bad thing, as long as you have a robust nest egg and are sure you'll be able to afford retirement.

However, if you have little to nothing saved and are claiming early just because you're tired of working, you might regret that decision a few years down the road.

The average retiree receives just over $1,500 per month in benefits, according to the SSA. It can be tough to survive on that amount, especially if you run out of savings and don't have any other source of income. In addition, because your benefits will be reduced by claiming early, you may receive even less than $1,500 per month if you claim at age 62.

If you retire and claim benefits early and then a few years later regret your choice, it may be difficult to go back to work at that point. So if your savings are sparse and you're able to continue working, it may be wise to keep going a few years so you're not struggling financially in retirement.

3. You want to boost your work income

If you plan to work past age 62, you may decide to claim benefits early anyway, just for the boost in income. But depending on how much you're earning at your job, your benefits may be reduced or withheld entirely.

Each year, the SSA sets income limits for those who are working while receiving benefits. If you earn more than that limit, your benefits will be reduced. For 2021, the income limit for those who won't reach their full retirement age is $18,960. Your full retirement age is either age 66 or 67, depending on the year you were born. So if you claim next year at age 62 and you're earning more than $18,960 per year, you'll receive smaller Social Security checks.

Just how much smaller your checks are, though, will depend on your income. For every $2 you earn above the $18,960 limit, your annual benefits will be reduced by $1. So, for example, if you're earning $30,000 per year, that's $11,040 over the annual limit. Your benefits will be reduced by $5,520 per year, or $460 per month. Also, depending on how much you're earning, it is possible for your benefits to be withheld completely.

The good news is that these benefit reductions are only temporary. Once you reach your full retirement age, your benefit amount will be recalculated to account for the money that was withheld. Just keep in mind that if you're claiming early to boost your income, that strategy may not be as effective as it seems.

Make the most of Social Security

Social Security benefits can be a substantial source of income in retirement, but it's important to choose wisely when deciding at what age to claim. While claiming early can sometimes pay off, make sure you've put plenty of thought into your decision before you file.

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