When working people near retirement age, they often wonder whether they should collect social security early or wait until they hit the normal retirement age of 67.
While they can collect social security benefits, the question is, should they? The best thing a person on the cusp of retirement can do is speak with a social security professional to find out their options. Several rules apply to collecting social security, and many may not be in the best interest of those who cash in early.
Theoretically, individuals can apply for social security starting at the age of 62. But they should also be aware that their monthly benefit will be reduced by as much as 30%. that is nearly two-thirds of the money being left on the table. People who may not be in the best financial situation should really think this through.
Taking the money is very tempting, but health, lifestyle, and longevity should also play a role in whether or not a person claims their benefits. For every year a person delays retirement, 8% is added to the monthly benefit amount. That’s a lot of money to simply give away.
The Social Security Administration offers a chart to show retirees exactly how retirement age can affect your benefits. Here’s an example:
Jane is a single, 62-year-old woman who wants to file for social security. Her monthly benefit for retiring at 62 is 1,420. If she waits about four and a half years and retires at the age of 66, her benefit goes up to $2,000 a month. If she opts to wait until the age of 70, the benefits are $2,560. So, Jane potentially loses nearly $1,000 in monthly benefits for retiring early.
Another thing potential retirees should consider is that they cannot receive Medicare benefits until they have reached the age of 65. So if they have to pay out of pocket for medical expenses, there won’t be much money at the end of the month.
So, to answer the question: no, individuals should not apply for benefits at the age of 62. There are no real advantages. In fact, health, lifestyle, and finances could be affected negatively.