3 Reasons to Claim Social Security Early – Motley's Fool

In many aspects of life, timing is paramount. This is certainly true for social security benefits because starting to collect them can have a major impact on the total amount you receive from the program.

You can start receiving your benefits from the age of 62 and up to the age of 70. Here's why you can start as soon as possible.

Claim your benefits early as it's a wash

You are eligible to receive all of your social security benefits at the age of your "full" retirement, specified by the Social Security Administration (SSA). For most of us, it's our 66th birthday, our 67th birthday or somewhere in between. Nevertheless, you can begin to perceive from the age of 62 and up to the age of 70. For every year beyond the retirement age that you delay in starting to collect Social Security, your benefits will increase by approximately 8%. If you wait between 67 and 70 years, you will get 24% more benefits. If your full benefits amounted to $ 2,000 a month, they would increase to $ 2,480, a difference of $ 5,760 over one year. During this time, if you start collecting early, your benefits may decrease by 30%.

Starting as late as possible may seem like the right thing to do, but it is not necessarily the case. According to the Social Security Administration, "If you reach the average life expectancy of a person your age, you will receive roughly the same amount in lifetime benefits, whether you choose to start receiving or not benefits at age 62, at the age of full retirement, at age 70. or any age between the two. "That's right – if you live a life of average duration, it's almost a wash, and collecting at age 62 can make a lot of sense. After all, the checks you receive if you start collecting at 62 or 67 could be a lot smaller than what you would have at 70, but you'll get a lot more.

Are there exceptions to this justification? Of course. Start collecting early do not If you can linger and wait, your family members tend to live very long, especially if you are in no hurry to retire. If there is a good chance that you are living an average life, starting to collect early should be attractive.

Claim your benefits earlier to retire sooner

Another good reason to claim your social security benefits sooner, as at age 62, is that it can allow you to: to retire early. Most Americans think it is ideal to retire early, which is very logical. After all, the sooner we retire, the sooner we can get to all the fun things we've been doing for a long time, like taking a few months to drive around the country, spending weeks abroad, learn to sail or take history classes at the local college. As they are younger and generally healthier, pre-retirees can often take better advantage of their money and are better able to travel, enjoy their leisure, etc.

Of course, retiring early is easier said than done. You must also have sufficient income for your entire retirement. This is why many people assume that they can not retire any time soon. And many people are right on this point. According to the 2017 survey on confidence in retirement, about 24% of workers reported saving less than $ 1,000 for retirement and 55%, less than $ 50,000. Only 20% had saved $ 250,000 or more – and even that amount will not go as far as you might think.

Nevertheless, there is a good chance that you can actually afford to retire earlier, or at least earlier than expected, although you may have to be more aggressive in saving and saving money. ;investment. Here is how much you could accumulate, based on your retirement distance, if your money increases on average by 8% per year:

Data source: Calculations by author.

To establish retirement income streams, you can use part or most of your budget to buy a fixed annuity, and you can also devote a significant portion of your portfolio to healthy and growing stocks. who pay dividends. A $ 400,000 portfolio with an average dividend yield of 3% will generate $ 12,000 per year, or $ 1,000 per month. There are also other ways to increase your retirement income.

Claim your benefits quickly because you can change your mind later.

Here's one last reason you could start collecting Social Security early: because you can change your mind. Change of mind is not so simple, but it's can to be finished. Here's how: If you want to start receiving benefits at age 62, then at age 63, decide you want or need to re-enter the workforce, you can pay back the money you received from Social Security, and then you can start to collect the later date. There are also other rules, such that you can only do it once and within 12 months of applying for your benefit. In addition, if someone else receives benefits based on your income (such as your spouse), he or she will have to give consent to your plan.

Here's another approach: If you are under retirement age, Social Security reduces your social security check by $ 1 for every dollar earned by working above the $ 17,040 mark. If you have reached your retirement age or have reached retirement age, your benefits are set at over $ 45,360. (These numbers are for 2018. They change from time to time.) Thus, much of your check will be withheld – not denied – if you work significantly after applying for benefits. What happens to this money? Well, that does not just disappear; instead, it is used later to increase the size of your monthly payments.

The most common age at which people start collecting social security is actually 62. Many of these people start early because they want to, and many more because to have perhaps because of unexpected job loss or a health problem.

Think about the idea of ​​starting to collect early, yourself. Crunch your numbers and see if you might be able to make it work. Even though it may not be possible to start collecting Social Security benefits at age 62, you may be able to start collecting them earlier than originally planned. Nor do you forget that there are strategies you could use to maximize your social security benefits.