When are you going to claim social security benefits? This is one of the biggest – and most important – questions you have to answer when you get older. Unfortunately, many people do not fully see all the information when making this decision. Instead, many claim 62 because it is the very first that they can get their hands on this source of income.
While claiming it is 62, it can sometimes make sense, especially if you don't think you will live long, there are also many circumstances where you start earning money from this early, is a bad choice. In fact, here are three main reasons people often claim benefits at 62 that are actually very bad reasons.
1. Because you do not realize that your benefits will go up if you wait
To be eligible to receive your primary insurance amount (the usual privacy benefit you are entitled to), you must wait to claim full retirement benefits (FRA). Full retirement age is determined from the year of birth. For anyone born after 1960, FRA 67.
If you retire at 62, you go to retirement before you are full of retirement age. Unfortunately, this means that your monthly benefit will be reduced. The benefit you receive is reduced by 5/9 by 1% for each month before FRA as you retire. If you retire more than 36 months before the FRA, then for each previous month your benefit is reduced by an additional 5/12 of 1%. This chart shows the detrimental effect this may have on the benefits of social security, as 62-year-olds with a FRA of 67 would result in a 30% reduction in social security benefits.
Unfortunately, once you have reduced your social security benefits by claiming early, you are stuck with your reduced benefit – you do not back your standard primary insurance amount after having full retirement age. All future life-time adjustments – or annual growth – will be based on this reduced performance.
It is not advisable to reduce the benefits of social security benefits because these benefits are probably your only source of guaranteed lifetime income. Stanford Center experts recommend waiting for 70 years if you can claim benefits to maximize them. But even if it is too long, wait at least until full retirement age, avoid getting your benefits cut by a large percentage.
2. Because You Get Too Bad to Job
According to the Center for Retirement Research at Boston College, more than a third of older workers go faster than they planned. Among these workers, health sizes are the leading cause of early retirement. These health injuries include existing health conditions that have a greater impact on the ability to perform work than expected or change in health status.
If you become too ill for work, it may seem like demanding social security. Retirement benefits are the only way to support yourself. But you forget another program for social insurance: SSDI (Social Security Disability Insurance). You pay into this program with each paycheck, and you qualify to claim benefits through it at any time during your career after earning enough credits to qualify. This includes between 62 and full retirement age.
If you choose SSDI benefits instead of claiming retirement benefits of 62 years, you will not face a reduction in benefits coming from early claiming. You also qualify for disability. A disability freezer means some years where you have earned a low income due to the fact that disabling your condition is not included in the formula used to determine how much your performance will be.
When you request SSDI, you can continue to receive income income until full retirement age, then you will switch to retirement benefit received. The benefits you receive should be higher than if you had claimed early retirement benefits and had reduced benefits accordingly.
3. Because you believe the rumors that social security goes bankrupt
While some retirees claim early because they don't understand how the benefits work, others do so because of a big misconception about social security: mistaken belief that the benefits are going to run out.
According to a Gallup survey, more than half of Americans doubt they are getting any social security benefits at all. If you are in doubt about the benefits, it may seem smart to claim your cut as soon as you qualify.
In reality, however, there is no way social security goes bankrupt. The majority of social security insurance is distributed on the basis of money that comes in from wage tax. While there is a trust that covers the lack of what payroll costs and what is due to the recipients, this trust is not expected to run out of money before 2034, according to the latest asset management report.
It is unlikely that politicians should run out of money, especially when simple changes can be made, such as increasing the value of wages subject to social security tax. And even at worst, Social Security can continue to pay around three-quarters of the promised benefits to retirees.
So don't take a guaranteed reduction in the benefits of claiming early in the hope of avoiding a reduction in benefits that are likely to never happen.
Make an informed choice about when to claim social security
The decision when to claim social security benefits will affect your financial security throughout the pension. Make sure you understand how benefits are calculated and how to maximize your earnings for social security benefits before making your claim.