What Happens If You Stop Working At 62 But Dont Collect Until Full Retirement Age
If you stop working between the ages of 62 and your full retirement age You can stop working before your full retirement age and receive reduced benefits. Earlier retirement benefits are at the age of 62. If you claim benefits when you reach full retirement age, you will receive the full retirement benefit.
What happens if I retire at the age of 62 but postpone with Social Security? You can start receiving social security benefits at the age of 62, but the amount of the benefit is less than the total amount of your retirement benefit. After the age of 70, the benefit is not increased, even if you postpone starting benefits.
Youre Only Working Part Time
If you claim Social Security prior to your full retirement age while still holding down a part-time job, you might have your benefits reduced if your work income exceeds the annual limit. For 2022, if you are under full retirement age, your benefits go down by $1 for every $2 your income exceeds $19,560. If you reach full retirement age in 2022, your benefits go down by $1 for every $3 your income exceeds $51,960 prior to reaching full retirement age. If youre working part-time to help make ends meet, taking Social Security at 62 might make sense.
Youll Get To Retire Sooner
Many people dream of early retirement. If youve spent the bulk of your career at a grueling job, you may want nothing more than to leave the workforce on the early side. And while youll generally need a healthy level of retirement savings to make that possible, claiming Social Security could provide the financial push you need to feel comfortable ending your career a bit sooner than most.
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Basic Social Security Structure
Now that the research has begun Here are some key stats:
- Starting benefit age range: anytime from age 62 to 70
- Based upon your 35 highest-earning years
- Historical earnings years are indexed to retirement year dollar values
- Bend points mean your benefit amount is progressive you get more out of lower wages than higher
- Benefit amount is typically adjusted with CPI annually
- Benefits are subject to income taxes in a similar way as any other income with some mild caps/deductions at very low-income levels
No One Else Is Relying On Your Benefits
In the event of your death, a surviving spouse, minor or disabled child can receive money from the Social Security Administration based on the amount of your benefits. For example, a surviving spouse can receive between 71.5% and 100% of your benefit amount, depending on the surviving spouses age. A disabled child can receive 75% of your benefits each month even after youre gone.
If no one else can qualify for benefits based on your record, you might want to retire early because no one is depending on that money. If everything else falls into place and you meet the minimum Social Security retirement age, consider collecting your benefits early and enjoying life.
What If I Change My Mind
If you receive Social Security benefits at a reduced rate but then change your mind, you have the option of withdrawing your application within the first 12 months of receiving benefits and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. Be aware that you’re limited to one withdrawal per lifetime.
For example, let’s say you elected to receive early benefits at age 62 but then decided to go back to work at age 63. You could withdraw your Social Security application, pay back the years’ worth of benefits you received, go back to work, and then wait until your full retirement age to restart your benefit checks at a higher level.
Once you reach full retirement age, another option is to voluntarily stop benefits at any point before age 70 to receive delayed retirement credits . Benefits will automatically restart at age 70 at a higher amountâunless you choose to start taking benefits before then. Note that when you withdraw your application or stop your benefits after full retirement age, you must specify if your Medicare coverageâif you have itâshould be included in the withdrawal.
Advantages Of Taking Social Security At 62
Overall, there are many pros to drawing from social security at the youngest age and investing.
- Earlier access to funds can serve as an emergency fund
- Greater flexibility with investments mean higher potential upside value
- Likely greater asset value in your later years which could offer more flexibility and comfort at end of life
- Drawing down funds earlier from the SSA removes some risk of the SSA going belly up or changes to the law removing/reducing your access to benefits
- Lower annual benefit amounts yield lower total taxable income which might make the difference between qualifying for certain programs or not
- Lower benefit amounts also mean lower income thresholds for lower taxes on social security income itself
How Does The Calculator Estimate My Retirement Benefits Payment
Our simplified estimate is based on two main data points: your age and average earnings. Your retirement benefit is based on how much youve earned over your lifetime at jobs for which you paid Social Security taxes. Your monthly retirement benefit is based on your highest 35 years of salary history. You can get your earnings history from the Social Security Administration .
Your Social Security benefit also depends on how old you are when you take it. You can start collecting at age 62, the minimum retirement age, but youll get a bigger monthly payment if you wait until full retirement age, which is 66 but is gradually moving to 67 for people born in 1960 or after. If you can wait until 70 to start collecting, youll receive your maximum monthly benefit.
A single person born in 1960 who has averaged a $50,000 salary, for example, would get $1,349 a month by retiring at 62 the earliest to start collecting. The same person would get $1,927 by waiting until age 67, full retirement age. And he or she would get $2,389, the maximum benefit on those earnings, by waiting until age 70. Payments dont increase if you wait to collect past 70.
Other factors affecting the size of your benefit include whether youve worked for state or local government for more than 10 years your Social Security payment may be decreased if you paid into the civil service retirement program, for example.
Taking Social Security At 62
Unless you meet a few clear-cut criteria, you’ll want to give the idea of taking Social Security at age 62 quite a bit of thought before you apply for benefits. Unless you have a critical illness, you’ll likely receive more income over your lifetime by starting your benefits later.
For example, let’s say that you live to age 84. You can get varying amounts, depending on whether you start Social Security at age 62, 66, or 70. To do the math, multiply your monthly benefit amount times 12 months, then multiply that by the number of years you expect to receive benefits.
- Age 62: $835 × 12 × 22 = $220,440
- Age 66: $1,114 × 12 × 18 = $240,624
- Age 70: $1,470 × 12 × 14 = $246,960
You get more total income by waiting until age 70 to begin benefits. If you live longer, the age 70 plan works even better for you than the examples above.
For instance, if you start your benefits at 70 and live to age 94, you’ll receive $423,360 from Social Security. If you’d started at 62, you’d only get $320,640.
In general, the longer your life expectancy, the longer you should wait to start drawing Social Security.
Below are a few general guidelines you can use to determine whether it makes sense to take Social Security retirement benefits at age 62.
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List Each Year’s Earnings
Your earnings history is shown on your Social Security statement, which you can now obtain online.
In the table below, sample earnings for a hypothetical worker born in 1953 are shown in Column C. Only earnings below a specified annual limit are included. This annual limit of included wages is called the “Contribution and Benefit Base” and is shown as Max Earnings in Column H in the table.
Thinking Of Taking Social Security At 62
Keeping tabs on your expected social security benefit and planning ahead will go far in maximizing the value of this government-run income insurance plan. Depending on your income situation in your 60s, deciding to draw your benefit at the earliest age could be smart if you plan, prepare, and execute a sound financial strategy. This is doubly true in the context of how it might affect your taxes.
So far as my father and his plans, Im delivering the research Ive done to help him make a decision. I dont think its a very clear cut decision either way, and itll likely affect what decision my mother makes as well. Shes a bit younger than him, but is reaching the age 62 threshold.
What Id most like to convey is that financially it seems like a bit of a toss-up in the big picture. What I want to discourage is them working longer partly to increase their social security benefit. I think they believe they have enough.
If youre thinking about taking social security at 62, I hope this has been a productive review of the pros and cons. For readers closer to my own age, I dont think its smart to not plan in advance for these sorts of decisions. While I suspect the age threshold will increase , its still only about 25 years away for me. Thats not all that long!
Information Needed To Calculate Social Security Benefits
Keep in mind that the result youll get using our Social Security calculator is only an estimate, and calculates your potential benefits only. There may be other factors that affect the actual benefits youll receive, including the length of your work history, the type of jobs youve had, pensions youve earned and taxes you may have to pay on benefits.
This calculator doesnt account for situations in which eligible widows, ex-spouses or dependents may be able to collect someone elses Social Security benefits.
The amount of your Social Security benefit is generally based on your average income during your career. The formula is complicated but essentially gives you a percentage of your monthly income based on your earnings history. Our calculator will compute this for you.
To figure out your estimated monthly Social Security benefits, youll need to enter the following key pieces of information into the calculator:
Doing A Breakeven Analysis And Other Ways To Decide How Soon To Start
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If youre about to retire, you may be wondering whether you should start claiming your hard-earned Social Security benefits now. Here are a few key factors to consider in making that decision.
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Disadvantages Of Taking Social Security At 62
Of course, there are plenty of cons as weve discussed.
- More active approach, requiring more effort and interest in maintaining investments and managing withdrawals
- Assets are at greater riskinvested cash could follow the market down in a recession or depression even when invested conservatively
- Loss of the security the SSA offers when managing the funds
- Potential tax consequences of investment gains
- Potential social program qualification loss due to investment gains/income
- Greater annual benefit amounts could push recipients into higher income tax brackets, out of social security income specific deduction thresholds, or out of certain social programs that have income requirements
And these are just some of the retiring at 62 pros and cons weve worked through in this post.
Three Great Reasons To Take Social Security Benefits At 62
Theres no such things as the perfect age to sign up for Social Security. You get an eight-year window to claim benefits that begins at 62 and ends at 70, financially speaking, and each age within that window has its pros and cons.
Now it just so happens that 62 is the most popular age to sign up for Social Security, but it also comes with consequences. Youre entitled to your full monthly benefit based on your wage history once you reach full retirement age, or FRA. That age is either 66, 67, or somewhere in between those two ages, depending on your year of birth.
If you claim Social Security at 62 with an FRA of 66, youll shrink your monthly benefit by 25%. And with an FRA of 67, youre looking at a 30% reduction by filing at 62. But despite that tremendous hit to your retirement income, heres why it could pay to land on 62 as your Social Security filing age.
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How Can I Save More For Retirement
When it comes to saving for retirement, the first step is picking the best retirement account. If youre already saving in a retirement account, make sure youre contributing enough to get your employers full matching contribution and then put your contributions on autopilot.
These strategies have been proven to help people save more for retirement, but dont stop there. Make a plan to gradually boost the amount you contribute each year, preferably each time you receive a raise. For more, see our guide on how to save for retirement.
Benefit Reduction If Taken Before Full Retirement Age
When calculating benefits for early retirement, there are one or two calculations, depending on how early benefits are taken. Assuming a normal retirement age of 67, the age of 62 is the earliest year a person can receive benefits or 60 months early.
The benefit is reduced by 5/9 of 1% for each month before the normal retirement age , up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of 1% per month.
For example, let’s say that a person wants to retire at 62, leading to a 60-month reduction from the normal retirement age of 67. The first 36 months would be calculated as 36 months times 5/9 of 1% plus 24 months times 5/12 of 1%.
- First 36 months: 5/9 = .5555 * 1% = .005555 * 36 months = .19999 or 20%*
- Remaining 24 months: 5/12 = .416666 * 1% = .00416666 * 24 months = .0999 or 10%
- In other words, benefits would be reduced by 30% if taken at age 62.
*The results were rounded and multiplied by 100 to create a percentage.
Ssagov Has A Calculator To Check Your Benefit
If sheâs 62 and claims her share of your benefit, she will be receiving benefits 60 months before her normal retirement age. She can start at 62 years plus one month, and her benefit will be 32.71% of your amount. Calculate the amount for yourself using the SSA.gov spousal calculator. Using this formula, the amount is $747 per month, which would be reduced further by the income test if she continued to work .
Do The Math Collecting Social Security Later Will Cost You
In 2019, the average Social Security check at full retirement is approximately $1,500 per month.
If you decide to take that money at 62 you would receive approximately 70% of that amount, which is $1,050.
Over a period of 12 months, that comes to $12,600. Multiply that times 4 years and you get $50,400 in Social Security benefits before age 66.
If you wait and apply later, that is cash you give up at a time in your life when you may be able to put it to its best use. Examples of why a person would claim benefits at 62 include investment opportunities, unemployment, disability, illness, etc.
To be fair, lets look at it from the other perspective.
A 30% reduction in your check amount is what Social Security estimates you will receive if you file at 62.
Using that $1,500 average figure again 30% of that comes to $450 per month.
Again, multiply that by 12 and you get $5,400.
Admittedly, thats a decent amount of money you forfeit by collecting at 62.
However, you would have missed out on 48 payments, plus you would have had to contribute to Social Security for 4 years! It would take you at least until you were 76, or perhaps into your 80s before you would break even.
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What Is The Future Of Social Security
As of June 2022, the Social Security Trust Fund is projected to have enough resources to cover all promised benefits until 2035 when, absent a change from Congress, benefits would need to be cut for all current and future beneficiaries to about 80% of scheduled benefits.2 Over the longer term, changes to the full retirement age or means testingâwhich could reduce or eliminate benefits based on your other income sourcesâmay also be considered.
If you’re skeptical about the future of Social Security or wary of potential changes, you may be tempted to start benefits early, assuming that it’s better to have something than nothing. Regardless of your situation, if you are concerned about the future prospects for Social Security, then that’s a good reason to save moreâand earlierâfor your retirement.