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Why do so many people demand social security at the age of 62? – The Motley Fool




Benefits are security-based. Specifically, they are calculated from the average of the 35 highest paid employees on the job and the adjustment of wages for inflation. However, the age at which these benefits are claimed can cause them to go up, down, or remain the same.

Someone who claims Social Security at full retirement age will receive the exact monthly benefit his or her earnings record allows. This age, depending on the year of birth, is either 66, 67 or 66 and a certain number of months. However, the Social Security Administration allows seniors to apply for benefits as early as age 62, which means they have the opportunity to get their money between four and five years ahead of full retirement age.

  Older man wrapping arm around older woman while holding newspaper

PICTURE SOURCE: GETTY IMAGES.

However, there is a catch: For each year benefits are required before full retirement age, they are reduced as follows:

  • 67% per year for the first three years.
  • 5% per annum for each year thereafter.

This means that someone with a full retirement age of 67 who registers 62 has a 30% reduction in benefits which in most cases will be in effect permanently. (The only way for such a reduction to and not to be permanent is to withdraw a grant application and repay all money collected within a year.) Given the number of seniors who depend heavily on Social Security to make ends meet, it would make sense to shy away from filing as early as possible. But surprisingly, 62 is the most popular age to claim benefits, and here are a few reasons why.

1. Seniors do not leave election

Voya Financial estimates that 60% of employees retire earlier than expected, and the causes drive the spectrum from job loss to health problems that make it impossible to remain employed. Therefore, seniors who are forced to withdraw earlier than planned may have no choice but to claim benefits as soon as possible, especially if they do not have the savings to pay the bills.

2. Health problems play a part

Poor health can make it difficult to keep a job, but it can also shorten life expectancy. And older people who do not expect to live a long life are generally recommended to apply for asylum as early as possible. Doing so diminishes the benefits on a monthly basis, often increasing your total lifetime collected.

Someone with a monthly benefit of $ 1,500 at a full retirement age of 67, for example, would instead collect $ 1,050 a month by filing 62. But if the person only lives to the age of 71, that's income $ 41,400 in life insurance for filing at 62 instead of waiting until full retirement age.

3. Social Security's future is shaky

Many workers worry that Social Security will not be close to them in retirement, or that it will disappear completely in the not so distant future. As such, they rush to claim benefits as early as possible to avoid losing revenue after the program's demise.

However, the reality is that Social Security does not break down. If the program's future funding shortfall is not addressed, it may have no choice but to cut the benefits down, but even that is not set in stone. But because so many seniors buy into the myth that Social Security is on the brink of bankruptcy, they are applying for benefits the moment they qualify.

Claiming Social Security at 62 is not always a bad idea, and it certainly makes sense for seniors with health problems who do not expect to live a long life. But anyone thinking of 62-year-old filing should consider the disadvantages of jumping the gun and the upside of waiting. This is especially true for senior citizens without savings who expect to be dependent on social security as their primary source of income during their golden years.



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