[ad_1]
The amount you receive from social security – an essential source of retirement income – will depend very much on when you start receiving benefits. You can start collecting social security at the age of 62, but if you do, you risk losing thousands of dollars in benefits each year and leaving tens of thousands of dollars of profits on the table. during your life. In addition, you could lock up your spouse in a life of income below expectations. Here are three terrible reasons to decide to claim your social security benefits early.
N ° 1: You want financial freedom now
At first glance, it may seem financially wise to pocket social security checks at age 62 to increase your monthly income, but if you deepen the rules associated with social security, you'll discover that promptly claiming to improve your financial situation may not be the best shot.
SOURCE OF IMAGE: GETTY IMAGES.
You see, Social Security pays all of your benefits only if you wait until you reach the age of retirement in order to claim your rights. The age of retirement varies, but for people born after 1954, it varies between 66 and 67 years. If you apply earlier, social security will significantly reduce your benefits. It reduces it from 5/9 to 1% for each month you claim up to 36 months, and then subtracts it from 5/12 to 1% for each additional month. These fractions can really add up. For example, if you are 67 and claiming at age 62, you will have 30% less per month than you would expect.
There is also a quirk that makes early claims less attractive if you keep working. Social security only allows you to earn a certain amount every year before you begin to limit your benefits a bit. The amount you can earn changes each year, but it will retain $ 1 for every dollar you earn above $ 17,040 in 2018. This means that if you claim to be 62 and plan to continue working, you could find with much less than you expected. in additional income.
N ° 2: You want to maximize your benefits for life
It may be tempting to take Social Security early to make sure you collect as much as you can before you die. However, thanks to advances in medicine, we are living longer than ever before and you may be wasting your time claiming at the age of 62. The United Nations predicts that Americans who will reach the age of 65 in the next decade will live 20 or more. years, against less than 15 years in the 1950s.
Data: United Nations, Department of Economic and Social Affairs, Population Division (2017). World Population Outlook: The 2017 Revision, custom data acquired via a website.
Social security is designed to pay the same amount to the average recipient during their lifetime, regardless of when they apply. That's why they reduce the payment you receive if you claim earlier. This is also why they offer a bonus for waiting. Until the age of 70, you will be entitled to an additional two-thirds of 1% for each month of delay in your claim after reaching retirement age, or 8% per annum. year. This means that if your retirement age is set at 67 and you wait until you turn 70, you will receive 24% more than if you had claimed in time.
Social security uses average life expectancy tables to calculate these reductions and increases, but your life might be much shorter or longer than average. If you are in good health and your family lasts a long time, then retaining and collecting larger checks may result in greater lifetime benefits than claiming earlier.
Data Source: Author Chart.
N ° 3: You want to guarantee the financial security of your spouse after your departure
If your spouse is claiming Social Security spousal benefits, there is another quirk about social security that can make the claim at age 62 a mistake.
As a rule, spouses are entitled to spousal benefits if the amount they would receive on the basis of their own work record is less than 50% of the amount that their spouse would receive at the age of the spouse. retirement.
If a spouse claims earlier than his / her retirement age, his / her payment is reduced by 25/36 by 1% for each month claimed in advance by up to 36 months and by 5/12 by 1% for each month in each month. over 36 years old. no incentive for a spouse to delay the claim for spousal benefits beyond the retirement age, since deferred retirement credits do not apply to spousal benefits.
Spouse's benefits can boost your household's income, but widowers can not receive both a spousal benefit and a spouse's benefit after their spouse dies. They will only receive the higher of the two amounts. As a result, their monthly income may decrease after your death.
This drop in income could weigh on your spouse's budget if social security was their only source of income. So think carefully before you decide to claim early if you think your spouse can survive you.
[ad_2]
Source link
