Not everything can turn out better just because you do it early. The sooner you claim your Social Security retirement benefits, the more you probably get screwed. Usually, people speed up to get Social Security as early as possible, which is at the age of 62.
People often tend to accept that they will not live up to 62, leaving the money they deserved with the government. but what is more likely is that you will live longer than 62. Per Social Security Administration (SSA), an average man who is 64 today can expect to live until 84 and the same goes for women as well. If they had claimed the amount as soon as they reached the age of 62, what are the odds that they can still save money until they turn 80 plus?
So one popular way to help ensure you don’t go broke at your vulnerable age is to postpone claiming your Social Security retirement benefits. In fact, there are also noticeable advantages for those of you who will wait until 70.
While waiting a year or two can bring a whole lot of drama in your household, the following are some valid reasons why claiming your security amount earlier is considered a bad idea. Here are the 7 Reasons to Refuse Social Security Benefits at Age 62
7 Reasons to Refuse Social Security Benefits
1. Claiming Asap Can Reduce Your Benefit
People often misinterpret the thought behind Social Security as they think claiming the security amount earlier will give them a long time to enjoy the benefit, whereas the truth is otherwise. The original; amount of your monthly benefit is actually based on a specific formula that’s meant to stay neutral. Simply put, there wouldn’t be any change in the total amount of benefit that you may receive irrespective of the age when you fruits claim it.
But, when you claim at an age before what the SSA calls “full retirement age,” (an age depending on your birth year) your benefits will be reduced. For instance, if a person was born in 1955, then his full retirement age as per SSA will be 66 years and 2 months, whereas for anyone who was born in 1960 or later is 67. And, when you finally wait until your full retirement age, then you will receive a much better monthly benefit. With every year you wait until 70, your benefit will grow by as much as 8%.
In fact, SSA’s Quick Calculator can give you an idea of how much you can expect by the time you turn 70. Moreover, there are even better options like recommendations from specialized companies like Social Security Choices, who will tell you when would be the right time for you to go ahead. Whatsmore, even Stacy Johnson, Money Talks News founder himself received assistance from Social Security Choices.
2. A Possibility That You Might Outlive Your Other Retirement Income
If there is any possibility that you could end up using the most out of your retirement funds before you die, a lower Social Security benefit would become insufficient. Along with that, it is also inevitable to use the last penny left in your account, especially if you’re not going to be survived by a partner, who is also subject to receiving the benefits.
3. Not Working Longer Might Reduce Your Benefit
Your monthly benefit amount will be solely based on the income you earned during the 35 years you worked. But not everybody is willing to work for 35 years, often due to health issues. In that case, you will earn lesser benefits when compared to the others who have worked for 35 years.
On top of that, “Making Social Security Work for You” author Emily Guy Birken has revealed that low-earning years can also affect your retirement benefits.
Although early retirement is a dream for many, you can think of the big picture and search for ways to bring more cash into your pocket before knocking on the door of your last savings.
Reportedly, Birken has also mentioned that anything you can do to boost your earnings and replace those zeroes (yearly amount when a person retires even before completing 35 years), would do good in the end.
4. Colas Will Not Boost Your Benefit as You Think
A lower monthly benefit indicates each COLA (Cost-Of-Living Adjustment) will end up in less money compared to the amount you would have claimed when postponed. And it is because a COLA is the particular percentage of your monthly benefit, so when your COLA amount is smaller, it will also result in a reduced COLA dollar amount.
For example, a COLA of 2% COLA would increase a $2000 benefit by around $480 per year.
5. You Might Stuff Your Spouse
By working until your full retirement age, you can ensure your partner will have a better chance to lead a comfortable life in case you die first. That’s mainly because both widows and widowers can benefit from Social Security ‘survivors’ benefit after the death of their consort.
Say a man gets $2,000, and his wife’s benefit per month is $1700 then upon his death, her benefit will get boosted to $2,000, but in case he has worked until his full retirement period, then she shall receive maybe $2,480.
6. You Might Have to Pay a Tax
Most people take their Social Security earlier and live with it until it becomes a necessity to withdraw required minimum distributions from their own retirement accounts. But what happens is, this plan is capable of backfiring as these securities also need to be taxed.
Your benefits become taxable based on the ‘combined income’ which includes taxable income such as withdrawals from traditional accounts as well as traditional individual retirement accounts. So, depending on that particular amount, up to 85% of your Social Security benefit could be taxed. But there is a way to escape from the tax torpedo and that is by withdrawing less amount from your tax-deferred retirement account every year. Also, delaying the Social Security claim can also bring a positive impact on it.
Paying tax is one of the “nasty surprises” that come with Social Security.
7. You Still Want to Work
Just because the world turns in a particular direction, you don’t necessarily have to do the same. You can work as long as you want and by the time you actually think it is time for you to take your final break, then retire. At that point, your Social Security benefit might really benefit you the maximum.