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When Should You Apply For Social Security At 62

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What Other Factors Should You Consider When Deciding To Collect Social Security

Early Retirement Social Security | 3 Reasons You Should Take Social Security at Age 62

Before you decide to collect Social Security based on your break even point, you should also consider how collecting early or delaying could impact the benefit your spouse receives.

Since the Social Security formula benefit is based on an individual’s 35 highest earning years, women often collect less in benefits than men because of career breaks during motherhood and overall lower lifetime earnings. However, the Social Security spousal benefit erases some of the disparity in Social Security earnings between men and women.

The spousal benefit is available to all spouses, regardless of whether the spouse has a work history or not . The spousal benefit is 50% of the higher earner’s benefit and in order for a spouse to receive the benefit, the higher-earner must be collecting their own benefit.

The Social Security administration automatically determines whether an individual would earn more in Social Security benefits if they collected on their own work record versus their partner’s work record.

For example, if the higher earner receives a $2,000 monthly benefit, the spouse is eligible to receive up to $1,000, depending on whether they choose to wait until full retirement age, says Kiner. For example, if someone collects the spousal benefit four years before full retirement age, their benefit will be 35% of the higher-earner’s benefits.

Possible Solutions To The Social Security Trust Fund

There are many potential solutions to fix the lack of funding, but they all fit into two categories: increasing taxes or limiting eligibility.

Tax increase suggestions include raising the tax rate on wages, increasing the wage base, increasing taxes on those who make more than $300,000, or counting Roth IRA distributions as provisional income. Eligibility related changes include raising the full retirement age, decreasing the delayed credit, or setting up a needs-based reduction for higher income recipients.

None of these suggestions by themselves will completely solve the problemit will probably take a combination of changes.

People of Social Security age are the largest voting block, so congress doesnt want to upset them. The most likely will change something. When and what they change, however, is up for speculation.

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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Youre Planning Your End

Your Social Security benefits stop paying at your death, so if you die prior to collecting benefits, youll have missed out on benefits entirely. You need to figure out how to maximize your Social Security income, instead. For example, say youre planning to wait until age 70 so you can claim the larger monthly benefit. If you die right before your 70th birthday, you wont receive any benefits. Its very difficult to predict how long youll live, especially if youre in good health now. However, if you are suffering from a terminal or serious illness, the increased monthly benefit for delaying Social Security might not be worth it.

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Your May Have To Pay Taxes On Social Security Benefits

How Do You Apply for Social Security at Age 62?

Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don’t realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.

It doesn’t take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 12 States That Tax Social Security Benefits.

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You Cant Work Anymore

Even the best retirement financial plans and projections can go awry. For example, you might have planned on working until youre 70 so you could maximize your retirement benefits. If you get laid off at 62, however, and have difficulty finding another job, you might need to start taking your benefits just to get by.

Additionally, continuing to work in your industry simply might not be possible or healthy for you later in life. If your job requires manual labor, you might decide the risk of injury or other damage to your health isnt worth continuing to work. In this case, the healthier lifestyle youll get by retiring early could outweigh the smaller monthly Social Security benefit.

See: 17 Tips To Live Comfortably Off Just a Social Security Check

Children Can Also Collect Social Security Benefits

Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. The adult child can continue collecting the benefit even after the parent has died, as long as the disability prevents them from working.

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Tax Considerations For Social Security Benefits

How do these tax considerations affect when you should apply for Social Security benefits? At todays , they may not have much of an impact on most people. Still, tax rates and income thresholds can change, so its worth remembering that you will lose less of your Social Security to taxes if you are in a lower marginal tax bracket when you begin to collect.

You should also note that if you decide to return to work, even part-time, and arent yet at your FRA, your Social Security benefits may be temporarily reduced. The reduction is $1 for every $2 of earned income over $18,960 in 2021 . During the year when you reach your FRA, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021 until the month when you become fully eligible. That money isnt lost, however. The SSA will credit it to your record when you reach your FRA, resulting in a higher benefit.

How Social Security Is Funded

Should We Take Social Security at 62, 66 or 70?

Social Security is a pay as you go program. In other words, there is a tax on wages for those who are working, and this tax is supposed to cover the payments to those receiving benefits in retirement.

So, those who are working pay for those who are receiving benefits.

Heres how it works: most wage earners in the U.S. pay FICA taxes. The rate is 12.4% for Social Security and 2.9% for Medicare, for a total of 15.3% on wages. This tax is capped on wages that exceed the income wage base, $137,700 in 2020 .

For W-2 employees, the tax is split evenly between the employee and the employer, while self-employed persons are responsible for the full 15.3%. The funds collected through these taxes are then distributed as payments to those currently receiving Social Security benefits.

As boomers were working, they were paying more into Social Security than what was being paid out. This created a surplus which we call the Social Security trust fund. Now that boomers are retiring, we have the opposite situation. More money is going out than what is coming in, and the deficit is paid out of this trust fund. More on the trust fund later.

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Can You Still Work While Receiving Social Security

You can continue to work while you receive Social Security benefits. But there is a limit to how much you can earn and still receive full benefits. The earning limit may be adjusted each year.

If you earn above the limit, Social Security will deduct a certain amount of your benefits each year.

Social Security Benefits, Earning Limits and Penalties

RETIREMENT AGE
SSA deducts $1 from your benefits for every $3 you earn above the limit

When Should You Apply For Social Security Retirement Benefits

This is the first blog in our 3-part series: What FERS Retirees Should Know Before Starting Social Security Retirement Benefits & TSP Withdrawals

Are you ready to retire? If you are a FERS employee, you probably know that your retirement income is structured like a three-legged stool with these components:

  • FERS Annuity / Pension
  • Social Security
  • Thrift Savings Plan
  • How these three pieces fit together to provide you with the income you need is very important. Once you retire your annuity is paid monthly starting the second month after retirement. However, its entirely up to you when you begin to withdraw from your TSP and when to begin Social Security Benefits.

    Theres a lot to consider when deciding the best time to start collecting Social Security Benefits. People wonder if they should apply right away and collect as much money as soon as possible or wait until age 66 or 70 to get a higher lifetime benefit.

    In some respects, its a math problem. You can get a lower monthly payment for a longer period or a higher payment for a shorter period of time. The decision would be much simpler if you only knew exactly how long you were going to live.

    While going through this analysis, Clint Eastwood might ask, Do you feel lucky? If you feel lucky with respect to a long life, claiming Social Security later may seem like the best option. In reality, longevity is only one of many factors in this complex decision.

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    Calculating Your Retirement Benefits For Each Option

    To find out how much your benefits will increase or decrease depending on the age you retire, go to Social Security’s Early or Late Retirement Calculator. The SSA also offers online calculators to help you estimate your retirement benefits at each age. You can also see a personalized comparison of retirement benefits at age 62, at full retirement age, and at age 70 on your Social Security Statement. Go to www.ssa.gov/mystatement to view your statement. Social Security sends out printed statements every five years to those not receiving benefits, and every year to those over 60.

    Watch Out For Hidden Costs

    How To Determine Social Security Benefits At Age 62

    Youll also want to consider other lifestyle factors, especially Medicare. Americans become eligible for federal health insurance coverage at age 65, well after when you can begin to file for Social Security.

    If you stop working at age 62 and lose health insurance, you have to get supplemental insurance to bridge the gap until you turn 65 and Medicare kicks in, Neiser says.

    If you work during retirement, you have another incentive to delay collecting Social Security. Earning too much at a job after you begin collecting your benefit can reduce your payout, but only if you have yet to hit full retirement age.

    However, when you hit full retirement age, your benefit will increase to account for any benefit that was withheld earlier due to working. Heres how much you can earn and not get hit.

    If youre younger than full retirement age for all of 2021, the Social Security Administration will deduct $1 of your monthly check for every $2 you earn above $18,960 per year.

    If you reach full retirement age in 2021, the administration deducts $1 of your monthly check for every $3 you earn above $50,520 until the month you reach retirement age.

    Youll also owe Social Security and Medicare tax on your earnings, even if youre already receiving benefits.

    So those are some potential pitfalls to claiming Social Security early.

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    Plan First Withdraw Later

    Healthcare coverage can be a major retirement expense, and Medicare is not all-inclusive. Before you choose to take Social Security, make sure you’ve reviewed your budget, being careful to factor in healthcare costs, inflation and unexpected events.

    Don’t underestimate those expenses. A fixed income may not allow for much fluctuation. Also people are living longer, so retirement may be longer than you plan for. According to the SSA, more than 1 in 3 of today’s 65-year-olds will live to age 90. More than 1 in 7 will live to age 95.7

    The decision of when to take Social Security is important and personal. It will likely factor in to how you meet current and future healthcare needs.

    Plan before you make your next move, and be better prepared for what lies ahead. For added peace of mind, consult a financial advisor before making any major decisions about your Social Security and retirement date.

    This material is provided for informational use only and should not be construed as medical advice or used in place of consulting a licensed medical professional. You should consult your doctor to determine what is right for you.

    Humana is a Medicare Advantage HMO, PPO and PFFS organization and a stand-alone prescription drug plan with a Medicare contract. Humana is also a Coordinated Care plan with a Medicare contract and a contract with the state Medicaid program. Enrollment in any Humana plan depends on contract renewal.

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    How Do I Apply Online

    You will need to prepare all the relevant documents, confirm you qualify, and make sure you meet the requirements to apply online.

    Once you have done that, sign in to your my Social Security account, select apply for Retirement/Medicare. This could take anywhere from 10 to 30 minutes.

    If you would like to take a break you can save your application as you go and come back later.

    When you complete your application, make sure to submit it. A representative should contact you to update you or ask any further questions.

    However, please be careful when taking ANY phone call about your Social Security benefits!!! Unfortunately, there are quite a few scams related to Social Security numbers. A Social Security officer will NEVER threaten you or say you will go to jail if you do not give them your personal information.

    If you receive a phone call where someone says there is a charge against you, you will go to jail if you do not pay money or give us your information that is a scam! Hang up!

    If you would like to confirm your application status it is safest to call the Social Security office yourself. If you initiate the call it is safer than receiving a call from someone you do not know.

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    You Simply May Have To Start Collecting Benefits At 62

    While this table may have you mulling over which age is best for you to start collecting your benefits, you may actually end up with little choice in the matter. According to the 2019 Retirement Confidence Survey, for example, 43% of respondents reported retiring earlier than they expected, versus only 9% who retired later than expected. The reasons given for retiring early included health problems and changes at their company — which often refer to downsizings.

    Those who end up retiring early don’t necessarily have to start collecting Social Security benefits. In fact, for lots of people, it can be a good strategy to start drawing more from IRAs or other retirement accounts for a few years in order to delay starting to collect Social Security and thereby increasing the size of your eventual benefit checks. This isn’t best or even possible for many people, though. Those who simply don’t have enough to live on without Social Security should just start collecting their benefits as soon as they can.

    There are many in that last group of people: According to the Social Security Administration , Social Security benefits, on average, make up about 30% of elderly Americans’ income. Among elderly beneficiaries, about 37% of men and 42% of women get 50% or more of their income from Social Security, while more than 10% get 90% or more of their income from it.

    When Should You Apply For Social Security

    Should you take your Social Security benefits at age 62?

    Should you apply for your Social Security benefit at age 62 or later?

    Should you apply for your Social Security benefit at age 62 or later? According to the Social Security Administration, most people who are eligible for Social Security choose to start their benefits early.

    You can claim Social Security any time from age 62 to 70, but the amount you receive grows larger the longer you wait to receive it. Many people come out ahead if they wait at least until their full retirement age , which is different from the day you retire from your job. For people born 1943 to 1954, full retirement age is 66, reaching 67 for those born in 1960 or later.

    Those who take their benefits earlier that their full retirement age face reductions of 6 2/3% per year for the first three years they take benefits prior to their FRA , and 5% per year for each year further out than three years . On the other hand, there are delayed retirement credits of 8% per year up to the age of 70 for those born in 1943 or later.

    The Social Security Administration website gives an example of an individual whose full retirement age is 66 and who would receive $1,000 a month if they waited to apply at that age. If they applied for benefits at age 62, they would receive $750 per month, but if they waited until age 70, they would receive $1320 per month.

    Ultimately, the answer as to when to take your Social Security retirement benefits is up to you.

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