10 Good Reasons to Start Receiving Your Social Security Benefits Early

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Your retirement planning most likely includes receiving Social Security income, but when you begin receiving Social Security benefits can have a significant impact on your planning. The earliest you can collect benefits is at age 62, but you’ll get more money if you wait past your initial Social Security eligibility. If you wait until after your full retirement age (between 65 and 67) to begin receiving Social Security benefits, you can earn delayed retirement credits, which will increase your benefits even more.

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You may believe that waiting for larger benefits is preferable, but this is not always the case. There is no definitive answer to when you should start collecting Social Security benefits, but starting as soon as you reach the early retirement age of 62 may be the best financial move.

1. You are preparing for end-of-life care.

Your Social Security benefits stop paying when you die, so if you die before collecting benefits, you’ll be out of luck. Instead, you should figure out how to maximize your Social Security income. Assume you intend to wait until the age of 70 to claim the larger monthly benefit. If you die before your 70th birthday, you will not be eligible for benefits. It’s difficult to predict how long you’ll live, especially if you’re currently in good health. If you have a terminal or serious illness, the increased monthly benefit for delaying Social Security may not be worth it.

2. Your life expectancy is lower.

The government incentivizes you to delay collecting your Social Security benefits by increasing your monthly payment the longer you wait. For example, if you begin collecting benefits at the age of 62 when your full retirement age is 66, your monthly benefit will be approximately 75% of your full-age benefit. So, if you expected to receive $1,000 per month at age 66, you would only receive around $750 at age 62.

Although a larger monthly benefit may sound appealing, keep in mind that you would have to wait four years to receive that extra $250 per month. During those four years, you would receive $36,000 at a reduced monthly rate of $750.

When you start collecting $1,000 at the age of 66, that extra $250 per month will not allow you to break even for 12 years if you start earlier. If your health is deteriorating and you don’t expect to live past the age of 78, you’ll receive more benefits over your lifetime if you file your claim as soon as possible.

3. You Must Pay Off Your Debts

Before you retire, you must pay off some debts. If you have high-interest debt, applying for Social Security early can help you pay it off. Depending on your interest rate, the 8% annual increase in benefits you receive for each year you wait past full retirement age may not be worth the increased monthly benefit. Using your early benefits to reduce or eliminate your debt sooner may allow you to keep more of your benefits in the future.

4. You Are No Longer Able to Work

Even the most meticulous retirement financial plans and projections can go wrong. For example, you may have planned to work until the age of 70 in order to maximize your retirement benefits. However, if you are laid off at the age of 62 and are unable to find another job, you may need to begin receiving benefits in order to survive.

Furthermore, working in your industry later in life may not be possible or healthy for you. If your job requires manual labor, you may decide that the risk of injury or other health damage is not worth continuing to work. In this case, the healthier lifestyle that comes with retiring early may outweigh the lower monthly Social Security benefit.

5. You only work part-time

If you claim Social Security before reaching full retirement age while still working part-time, your benefits may be reduced if your work income exceeds the annual limit. If you are under the full retirement age in 2022, your benefits will be reduced by $1 for every $2 your income exceeds $19,560. If you reach full retirement age in 2022, your benefits will be reduced by $1 for every $3 you earn above $51,960 before reaching full retirement age. If you’re working part-time to supplement your income, taking Social Security at the age of 62 may make sense.

 

6. No One Else Depends On Your Benefits

In the event of your death, the Social Security Administration may pay money to a surviving spouse, minor or disabled child based on the amount of your benefits. A surviving spouse, for example, can receive 71.5 percent to 100 percent of your benefit amount, depending on the surviving spouse’s age. Even after you’re gone, your disabled child can receive 75% of your monthly benefits.

If no one else qualifies for benefits based on your record, you may want to retire early because no one is relying on that money. If everything else falls into place and you reach the minimum Social Security retirement age, consider retiring early and enjoying life.

7. You’ve already had 35 of your highest-earning years.

Your Social Security benefits are calculated based on your earnings over the last 35 years. If you’re in your prime earning years, you could increase your benefits by working for a few more years and deferring your benefits. However, if you are not going to increase your average earnings, such as if you are only working part-time or have had to retire early, you will not miss out on the opportunity to increase your benefits with higher earning years. You will, however, receive a lower benefit for not waiting until full retirement age.

 

8. You anticipate that your investments will grow faster than the increased benefit.

If you’re the next Warren Buffet, you might be better off taking Social Security early and investing the money than waiting to take a larger benefit later. Consider the inflation rate, the rate at which your benefits increase, and how much you can expect to earn in your portfolio when making the best decision. Given that benefits increase by 8% per year for each year you delay reaching full retirement age, it’s difficult to outperform that rate of increase in the market. These safe investments provide excellent returns.

9. You Want to Start Your Own Business

Some people view retirement as a time to unwind, but you may see it as an opportunity to do things you couldn’t before, such as start your own business. For example, you may have put off starting a business in the past because you were concerned about not making enough money. Social Security benefits may provide you with enough money to start your own business. And, if your business is successful, the income it generates may be sufficient to compensate for the future reduction in benefits.

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10. You’re concerned about the future of Social Security.

Some people are concerned about future Social Security changes, such as higher retirement ages, lower benefits, or higher benefit taxes. As a result, they want to get their hands on the sure thing as soon as possible. The government stated in a 2021 Social Security summary that Social Security trust funds will be depleted in 2034. Even so, annual Social Security taxes are expected to keep benefits at nearly three-fourths of their current levels.

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