When to start collecting Social Security is an important life choice, and it’ll have a lasting impact on your regular paychecks. To begin receiving benefits, you must wait until you reach age 62, but doing so will increase your monthly payouts. Although it may appear prudent to put off collecting Social Security, there are some compelling arguments in favor of doing so.
Some people spend their entire careers counting down the years until they can retire. However, if you put off retiring until you’re too old or sick, you might miss out on some of the best years of your life.
The decision to begin receiving Social Security benefits upon retirement is not mandatory. Filing for benefits at age 62 can supplement your income and make retiring in your early 60s more manageable financially.
Unfortunately, not everyone can choose their retirement age. Social Security benefits are a crucial safety net in the event of job loss and subsequent early retirement.
Early retirement claims can be prudent even for those with substantial savings and are especially so in times of economic downturn. If stock prices drop, your portfolio will suffer a loss. Taking money out of the market now could mean selling investments for less than you paid, effectively locking in losses.
However, by collecting Social Security, you can reduce the amount of money you need to withdraw from your savings each year. Claiming early will result in smaller checks, but this may be preferable to spending down savings too quickly.
No matter when you start collecting Social Security, you can expect to receive about the same amount throughout your lifetime. Making an early claim will result in smaller individual payments but a more considerable sum over time. If you put off collecting benefits, you’ll get more extensive checks but fewer of them in the long run.
Of course, this is predicated on the assumption that your lifespan is typical. Delaying benefits may result in a greater payout if you live into your 80s or older. However, you may benefit from making an early claim if you have a shorter-than-average life expectancy.
Naturally, no one can make a 100% accurate prediction of their life span, which isn’t the most pleasant topic to consider. Claiming early could be a wise financial move if you believe you won’t live to your mid-80s or beyond.
There are benefits to filing for benefits early, but one significant advantage to waiting is larger monthly payments. To reiterate, if your life expectancy is average, your lifetime benefit will be about the same, no matter when you decide to make a claim. The monthly payments will be much larger, but only if you wait to file.
If you are 67 at your full retirement age, and you file for benefits at that time, you will receive $1,800 per month. At age 62, your monthly benefit payment is reduced by 30%, bringing you down to $1,260.