Your retirement planning probably includes getting income from the Social Security Administration, but when you start collecting Social benefits can have a big impact on your planning. The earliest you can collect is 62 years old, but you will get more money if you delay your benefits past your original social security entitlement. If you wait until after your full retirement age (somewhere between 65 and 67) to start collecting social security, you can earn late retirement credits, which will increase your benefits even more.
You may think that it is better to wait for greater benefits, but this is not always the case. There is no definitive answer as to when you should collect social benefits, and taking them as soon as you reach the early retirement age of 62 may be the best financial step.
1. You plan your end-of-life care
Your social benefits stop paying on your death, so if you die before you collect benefits, you have completely missed out on benefits. Instead, divert your thinking to good things in life, such as maximizing your social security income. Let us e.g. say you plan to wait until you turn 70 so you can claim the larger monthly benefit. If you die just before your 70th birthday, you will not receive any benefits. It is very difficult to predict how long you will live, especially if you are in good health now. However, if you suffer from a terminal or serious illness, the increased monthly benefit for delaying social security may not be worth it.
2. You have a shorter life expectancy
The government encourages you to wait to collect your social benefits by giving you a larger monthly amount the longer you defer. For example, if you start collecting unemployment benefits at the age of 62, when your full retirement age is 66, your monthly benefit will be about 75% of your full retirement benefit. So if you expected your monthly benefit to be $ 1,000 per month. month at 66, you would only receive about $ 750 at 62.
While a larger monthly benefit may sound good, keep in mind that you have to wait four years to get the extra $ 250 per month. month. You will receive $ 36,000 over the four years for the reduced amount of $ 750 per year. month.
When you start raising $ 1,000 at age 66, the extra $ 250 per person will go up. month does not let you go in balance for 12 years compared to collecting early. If your health is declining and you do not expect to live until you are 78 years old, you will receive more in benefits over the course of your life if you start applying as soon as possible.
3. You have to pay down on debt
There are some debts that you need to tackle before you retire. If you have high-interest debt, social security requirements early on can help you pay down the debt. Depending on the interest rate you pay, the 8% annual increase in your benefits that you receive for each year you wait after the full retirement age may not be worth the increased monthly benefit. Using the early benefits to reduce or eliminate your debt in the past may mean that you will be able to retain more of your benefits in the future.
4. You can no longer work
Even the best financial retirement plans and projections can go wrong. For example, you may have planned to work until you are 70 so you could maximize your retirement benefits. If you get fired as a 62-year-old and have a hard time finding another job, you may need to start taking your benefits just to make ends meet.
Additionally, it may simply not be possible or healthy for you to continue working in your industry later in life. If your job requires manual labor, you may decide that the risk of injury or other damage to your health is not worth continuing to work. In this case, the healthier lifestyle you get by retiring early may outweigh the smaller monthly social security benefit.
5. You only work part time
If you claim social security before your full retirement age while still having a part-time job, you can have your benefits reduced if your earned income exceeds the annual limit. For 2022, if you are under full retirement age, your benefits will decrease by $ 1 for every $ 2 that your income exceeds $ 19,560. If you reach full retirement age in 2022, your benefits will decrease by $ 1 for every $ 3 that your income exceeds $ 51,960 before you reach full retirement age. If you work part-time to make ends meet, it may make sense to take Social Security at 62 years old.
6. No one else trusts your benefits
In the event of your death, a surviving spouse, minor or disabled child may receive money from the Social Security Administration based on the amount of your benefits. For example, a surviving spouse may receive between 71.5% and 100% of your benefit amount, depending on the survivor’s age. A disabled child can receive 75% of your benefits every month, even after you are away.
If no one else can qualify for benefits based on your record, you may want to retire early because no one is dependent on that money. If everything else falls into place and you meet the minimum retirement age for social security, consider collecting your benefits early and enjoying life.
7. You already have your 35 highest earning years
Your social benefits are based on your earnings in the 35 years in which you have had the greatest compensation. If you are in your highest earning years, you can increase your benefits if you keep working a few more years and defer your benefits. However, if you do not intend to increase your average earnings, as if you only work part-time, or if you have had to retire early, you will not miss the chance to increase your benefits with higher earnings for several years. . However, you will still receive a minor benefit for not waiting until full retirement age.
8. You expect your investments to grow faster than the increased dividends
If you’re the next Warren Buffet, it’s possible that you’re better off taking social security early and investing the money than you could by waiting to receive a major benefit later. When weighing the best decision, consider the inflation rate, how much your benefits increase, and how much you can expect to earn in your portfolio. However, given that benefits increase by 8% per year for each year you expect to reach full retirement age, it is difficult to surpass that rate of increase in the market. These safe investments provide high returns.
9. You want to start a business
Some people think of retirement as a time to relax, but you may see it as an opportunity to do things you could not do before, such as starting your own business. For example, you may have postponed starting a business before because you were afraid that you would not generate enough income. Social services can provide enough income to let you start your business. And if your business is successful, the revenue it generates may be more than enough to offset the future reduction in benefits.
10. You are worried that social security will disappear
Some people are worried about potential changes in social security in the future, such as higher retirement age, lower benefits or higher taxes on benefits. As a result, they want to take the safe thing as soon as possible. In a 2021 social security survey, the government said social security funds will be exhausted by 2034. Even then, annual social security taxes are expected to keep benefits at nearly three-quarters of the current level.
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This article was originally published on GOBankingRates.com: 10 Reasons Why You Should Require Social Security Early