We believe there are reasons to apply for social security at age 62, but there are also causes to wait until you are older. The request for early compensation may result in a significant reduction.
For ordinary Americans, choosing the age at which to start receiving social security will be the biggest question in pension planning. To be able to be eligible for social security, you need to be 62 years of age, and many people know this. What is probably not so clear is that early retirement from Social Security, at age 62, will result in a 30% lower monthly Social Security benefit than when you expect the age of complete retirement currently at 66½ years of age.
Social security benefits can also be increased by delaying receipt of this lifetime income. For each year in which the receipt of social insurance benefits is delayed beyond the full retirement age, monthly pension income will increase by 8% per year at age 70.
What does this mean in simple English? Suppose you are entitled to a full-time social security benefit of $ 2,500 per month (67 in this example). You will only receive $ 1,750 per month if you choose to benefit from social security at age 62, your benefit would rise to $ 3,020 or so for as long as you wait to turn 70 to apply for social security benefits. As the value of the benefit increases each month that you expect, it is essential to remember that you will no longer receive years of social security.
According to a study by United Income, 96% of retirees do not choose the ideal time to apply for social security benefits. The study says that 57% of retirees could generate more wealth in their lifetime if they waited until they were 70 to apply for benefits.
As a group, American retirees may lose approximately $ 3.4 billion in income during their retirement, only due to insufficient social security planning. This translates to roughly $ 111,000 for each family. The vast majority of this loss of income is because people apply for social security too soon.
The results of the combined income study were based on data from about 2,000 nursing homes, including gender and health, and seniors who applied for their various assets, social security benefits.
According to the research, the average retiree could increase the amount collected during retirement by 9% if more precise decisions were made as to when to start receiving social security. Currently, about 13% of retirees must live in poverty at some point in their retirement. This number can be halved if all retirees start applying for social security benefits at the right time.
While it may be alluring to apply for social security as soon as possible, there are problems when one is still actively working. One dollar will be deducted from every $ 2 of income earned above $ 18,240 (2020 limits) if the full retirement age has not been reached. The year you reach full retirement age, $ 1 in benefits will be deducted for every $ 3 earned with a different limit. In 2020, this limit is $ 48,600. This clawback provision will only apply to earnings before the month in which you reach full retirement age.
Remember that social security benefits are subject to taxes above certain income levels. It should also work when you choose to start reaping benefits. By planning tax proactively, you can minimize the taxes owed for social security benefits during retirement.
It is practically impossible to know the exact day to apply for social security benefits unless you are a psychic. That being said, there are some common points to consider. If you are not in good health, claiming early might make sense. On the other hand, if your grandmother is still alive, you can wait as long as possible before you apply for social security benefits.
For the vast majority of retirees, delaying social security benefits as much as possible will generate more income for life. This is even more true for couples. In order not to complicate the problems, planning to maximize social security is even more valuable for couples.
Other income and pension funds must also be taken into account. If you have a large pension or sufficient retirement resources to cover your standard of living during retirement, your social security options are not that important.
David Macgregor