There has been a definitive increase in the amount of people claiming social security benefits early. The current economic climate and fear of government policy changes are driving many to file for retirement benefits at the age of 62. While I understand the mentality of “grabbing what is available” my advice is to push your decision back as far as possible to avoid costly mistakes.
The amount of benefits paid to an individual varies upon several factors. Beyond your filing date, it also includes lifetime earnings, marital status, current income and other dynamics. The worst thing you can do is file before examining all of your options. The difference in monthly benefits received at age 62 as opposed to age 66 is around 25%. Do you think it would be nice to earn 25% for the rest of your life?
But monthly income is not the only consideration to keep in mind before claiming early retirement. Many of you will continue to work during this time, and if you make over $15,480 the government will reduce your benefits $1 for every $2 you earn over this amount. Your early benefits will also factor into how much you pay on income taxes at the end of the year. So although you will be receiving more money in the mail, a hefty chunk will disappear before it lands in your checking account.
The best advice I can give anyone is to never quit your full-time job simply to collect early retirement benefits. If you are healthy and able then I recommend working as long as you can and certainly until full retirement age. Keep in mind, if your employer provides health insurance, you will not be able to claim any Medicare benefits until age 65. This means you risk paying high insurance cost or having no insurance if you opt leave your employer’s plan.
It is not difficult to claim early retirement with Social Security. In fact, you are doing the government a favor by taking a benefits reduction. This is precisely why the option is available – to save the system money. But like all good things there is always a catch. Unfortunately, not enough people research all of their choices before making quick decisions. My advice for those considering early retirement with Social Security is to hold your horses. Good things come to those who wait!