Social Security: What Should You Do at Age 62?
Is 62 your lucky number? If you’re eligible, that’s the earliest age you can start receiving Social Security retirement benefits. If you decide to start collecting benefits before your full retirement age, you’ll have company. According to the Social Security Administration (SSA), approximately 73% of Americans elect to receive their Social Security benefits early. (Source: SSA Annual Statistical Supplement, 2013)
Although collecting early retirement benefits makes sense for some people, there’s a major drawback to consider: if you start collecting benefits early, your monthly retirement benefit will be permanently reduced. So before you put down the tools of your trade and pick up your first Social Security check, there are some factors you’ll need to weigh before deciding whether to start collecting benefits early.
What will your retirement benefit be?
Your Social Security retirement benefit is based on the number of years you’ve been working and the amount you’ve earned. Your benefit is calculated using a formula that takes into account your 35 highest earnings years. If you earned little or nothing in several of those years (if you left the workforce to raise a family, for instance), it may be to your advantage to work as long as possible, because you’ll have the opportunity to replace a year of lower earnings with a higher one, potentially resulting in a higher retirement benefit.
If you begin collecting retirement benefits at age 62, each monthly benefit check will be 25% to 30% less than it would be at full retirement age. The exact amount of the reduction will depend on the year you were born. (Conversely, you can get a higher payout by delaying retirement past your full retirement age–the government increases your payout every month that you delay retirement, up to age 70.) Stay tuned for more on this topic in the weeks to come!!