How To Retire At 62 On Social Security


Use Your Home As A Source Of Income

Can You Take Social Security at 62 and Still Work Retirement Question

If you have a lot of freehold value in your home, it can be quite easy to borrow against it. And so you may decide to take out a home loan to help pay your living expenses for a few years in the absence of collecting social security.

Of course, this strategy only works if you are able to borrow at a low enough interest rate. But if possible, then a loan combined with your savings can make it possible to wait for Social Security.

Another option worth considering is renting out part of your home for a few years and using your rental income to pay bills. This works especially well if you have a separate area of your home, such as a finished basement that allows for plenty of privacy.

Is It Better To Take Social Security At 62 Or Wait

So, today, I wanted to work through these numbers with you so that I have a more definitive explanation for my parents. As you might guess, Ive encouraged them to consider cutting loose and enjoying what remains of their lives, especially the small things, sooner rather than later.

If one of their motivations to wait is to draw a larger social security check, but the underlying math doesnt really support that as a financially smart decision, I want to tell them that.

Similarly, I want to be able to help you understand the system better. Not only for your own elderly family and friends but also for yourself.

While many of us within the FIRE community frequently dont include social security within our retirement calculations, I think its constructive to understand how the system works and how you might best make use of it. Even if youre not considering taking social security at 62, that doesnt mean you shouldnt understand the implications.

Thats if social security still works similarly as it does today once you actually reach the appropriate age!

How Much Less Do You Get If You Retire At 62

An employee can retire at the age of 62, but this can lead to a reduction of up to 30 percent. Starting to receive benefits after the normal retirement age may lead to higher benefits.

What happens if you retire before 62?

Your actual retirement date does not matter. If you wish, you can retire before the age of 62 and after the age of 70. However, if you retire before the age of 62, you must ensure that you have enough money to support you until social security contributions begin.

How much if I retire at 62?

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What If I Delay Taking My Benefits

If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit . For example, say you were born in 1955 and your full retirement age is 66 and 2 months. If you started your benefits at age 68, you would receive a credit of 8% per year multiplied by approximately two . This makes your benefit ~15% higher than the amount you would have received at age 66.

That higher baseline lasts for the rest of your retirement and serves as the basis for future increases linked to inflation. While it’s important to consider your personal circumstancesit’s not always possible to wait, particularly if you are in poor health or can’t afford to delaythe benefits of waiting can be significant.

If you decide to wait past age 65, you may still need to sign up for Medicare. In some circumstancesyour Medicare coverage may be delayed and cost more if you do not sign up at age 65.

Effect of late retirement on benefits

1.Represents Full Retirement Age based on DOB Jan. 2, 1955

2.PIA = The primary insurance amount is the basis for benefits that are paid to an individual

To review your situation, your annual Social Security statement will list your projected benefits at age 62, full retirement age, and age 70, assuming you continue to work and earn about the same amount until age 62, full retirement age, or age 70 before retiring. If you need a copy of your annual statement, you can request one from the Social Security Administration .

Social Security Retirement Planning

Claiming Social Security at age 62 isn

Im writing to you today from my first Amtrak ride since the pandemic started. The train is trundling along, heading north along the eastern coast on its way to the northeastern corner of the US. Were passing through the tiny railroad town of Ashland now.

Im on this ride in order to reach my father who is having knee surgery tomorrow. He needed someone available to cart him back from the hospital. Its also a good excuse to get some father-son time. By the time this is published, the surgery will be complete, and hell be on the road to recovery and a brisk pace once again .

While I was planning the trip with him over the phone last week, he offhandedly mentioned that he and my mother were working through some retirement plans .

As is often the case, I tried to get my bearings for what they were planning to do by asking high-level questions before he got too deep into the weeds.

Theyre both now in their 60s and trying to seriously plan an exit from work and onto retired life. My dad suggested their timeline would be Spring 2023so about two years off.

I asked what their motivation was for that particular time period. While the answer involved multiple concerns, including completing some home improvements in preparation to sell, one key point was related to social security.

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At What Age Is Social Security No Longer Taxed

At 65 to 67, depending on the year of your birth, you are at full retirement age and can get full Social Security retirement benefits tax-free. However, if youre still working, part of your benefits might be subject to taxation. The IRS adds the figures for your earnings and half your Social Security benefits.

How Much Can You Make And Draw Social Security At 62

If youre younger than full retirement age, there is a limit to how much you can earn and Page 3 2 still receive full Social Security benefits. If youre younger than full retirement age during all of 2021, we must deduct $1 from your benefits for each $2 you earn above $18,960.

Why do so many people claim social security at 62?

  • The simplest explanation for why so many people claim Social Security at 62 is because they cant claim benefits any earlier. Many people count the days until they can get benefits because they need this money to leave the workforce or to survive comfortably if theyve already been forced out of a job.

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Fact #: Social Security Is More Than Just A Retirement Program It Provides Important Life Insurance And Disability Insurance Protection As Well

Over 64 million people, or more than 1 in every 6 U.S. residents, collected Social Security benefits in June 2020. While older Americans make up about 4 in 5 beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance or were young survivors of deceased workers.

In addition to Social Securitys retirement benefits, workers earn life insurance and SSDI protection by making Social Security payroll tax contributions:

  • About 96 percent of people aged 20-49 who worked in jobs covered by Social Security in 2019 have earned life insurance protection through Social Security.
  • For a young worker with average earnings, a spouse, and two children, thats equivalent to a life insurance policy with a face value of over $725,000 in 2018, according to Social Securitys actuaries.
  • About 89 percent of people aged 21-64 who worked in covered employment in 2019 are insured through Social Security in case of severe disability.

The risk of disability or premature death is greater than many realize. Some 6 percent of recent entrants to the labor force will die before reaching the full retirement age, and many more will become disabled.

What A Social Security Break

Retire on Social Security at 62? No 401K / Savings.

In a nutshell, a Social Security break-even calculator can tell you when the best age is to start taking Social security benefits, in terms of how much money you could expect to receive over time. Going back to the previous example, lets assume that you track your benefit amounts over a 10-year, 20-year and 30-year period. Heres how your total benefits received would look over each of those periods, for all three starting points.

Your cumulative benefits after 10 years:

  • $144,000, starting at age 62
  • $122,400, starting at age 66
  • $52,800, starting at age 70

Your cumulative benefits after 20 years:

  • $288,000, starting at age 62
  • $326,400, starting at age 66
  • $316,800, starting at age 70

Your cumulative benefits after 30 years:

  • $432,000, starting at age 62
  • $530,400, starting at age 66
  • $580,800, starting at age 70

You can see that youd draw the most Social Security benefits in total if you wait until age 70 to start taking them, assuming you live to age 100. But that could be a big if when youre not in the best health.

What you have to keep in mind when using a Social Security break-even calculator is that the numbers are hypothetical. They dont take into things that could affect your ability to draw benefits or how far those benefits might go, such as:

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If I Retire At 62 This Year How Much Will I Collect In Social Security

Social Security is a significant source of income for most retirees and that means that the amount of Social Security income you collect will be a big consideration in deciding when you retire. You can begin collecting Social Security as young as age 62. However, you’ll only get 100% of your Social Security benefit if you wait until your full retirement age to start receiving benefits. Read on to find out how much you can expect to receive in Social Security income at age 62.

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

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The Case For Delaying Up To Age 70

On the other hand, if you can put off starting to collect those benefits and you have a decent chance of living a longer-than-average life, it’s worth delaying as long as you can, up to age 70. After that, there are no more increases to benefits, so 70 should be the latest age at which you apply for your benefits.

The more you know about Social Security, the smarter decisions you can make about it, which can make a big difference to your financial security in retirement.

When Is The Best Age For Americans To Claim Social Security

Retire at 62: 5 Simple Reasons Why You Shouldn

When to claim Social Security retirement benefits is one of the most crucial financial decisions facing older workers. But not everyone makes informed choices. The timing of the claim is key. The earlier a worker files to receive Social Security, the lower the monthly payment for the rest of that workers life. The longer a worker waits, the larger the benefit. Workers can claim as early as 62, but face a permanent reduction of benefits for every year they file before full retirement age of 66 . Even so, nearly half of American workers claim Social Security benefits at 62, and a cumulative 60% claim before full retirement age electing to accept a significant loss of income for the remainder of their lives.

Plain old human psychology can also play a role. Behavioral scientists refer to this as an intertemporal choice problem between receiving a smaller reward now or a larger one later. Eat that ice cream sundae or demur and avoid diabetes? Sell now or wait for the house to appreciate? Cash-in a 401K early or allow it to continue growing? In making these decisions, the allure of immediate gratification can be stronger than future gain. Researchers at Columbia University found that people faced with intertemporal choices often emphasize receiving the reward right away. Apparently, deciding whether to claim Social Security benefits sooner than later is no exception.

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Financial Benefits Of Working Longer

Many people want to retire as soon as it is financially feasible to do so, but it’s crucial to consider the earning and investing power you may give up if you stop working full-time and take Social Security at 62. If you leave a job with good pay and benefits, it may be difficult ever to regain that level of compensation if you need or want to return to work later. Of course, not everyone can keep working, but it is something to consider if you are healthy and have the opportunity to stay in the workforce, in either a full-time or part-time capacity.

The compensation benefits of your job could also affect your Social Security. Some companies allow stock awards to continue to vest after retirement date, and even into years to follow. These payouts are considered income, and could cause your Social Security payment to be taxed, or taxed at a higher level than in years after the awards have fully distributed. Delaying Social Security payments until those other income sources have been reported for tax purposes is worth consideration.

But there’s even more to the story. As you approach retirement, you’re often at the upper end of your lifetime earnings trajectoryand of your ability to save more for retirement. In addition, if you can keep working, you can make “catch-up” contributions to a tax-deferred workplace savings plan like a 401 or 403 or a traditional or Roth IRA. Catch-up contributions allow you to set aside larger amounts of money for retirement.

Theres A Social Security Spousal Benefit

Marriage brings couples an advantage when it comes to Social Security. One spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month.

Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.

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The Downside Of Early Applications

Applying for Social Security benefits at age 62 can lower the amount of your monthly benefits by as much as 30%. This can significantly reduce the available funds you will have to enjoy your retirement. Delaying your application for Social Security, on the other hand, can have a positive impact on the amount you will receive each month in these benefits.

The Social Security Administration has established a Full Retirement Age of between 66 and 67 for most retirees. You can see the exact amount of your earned benefits by visiting the Social Security website. This online resource can also provide information on your FRA and the impact of claiming your Social Security benefits at various stages of your journey.

Applying for Social Security at age 62 not only affects the amount you receive in benefits. Cost-of-living adjustments, known as COLA, are based on your benefit amount, you will receive a smaller COLA increase than if you had waited until your FRA to apply for Social Security.

Fact #: Social Security Provides A Guaranteed Progressive Benefit That Keeps Up With Increases In The Cost Of Living

Why retire and collect social security at 62?

Social Security benefits are based on the earnings on which you pay Social Security payroll taxes. The higher your earnings , the higher your benefit.

Social Security benefits are progressive: they represent a higher proportion of a workers previous earnings for workers at lower earnings levels.

Social Security benefits are progressive: they represent a higher proportion of a workers previous earnings for workers at lower earnings levels. For example, benefits for a low earner retiring at age 65 in 2020 replace about half of their prior earnings. But benefits for a high earner replace about one-quarter of prior earnings, though they are larger in dollar terms than those for the low-wage worker.

Many employers have shifted from offering traditional defined-benefit pension plans, which guarantee a certain benefit level upon retirement, toward defined-contribution plans s), which pay a benefit based on a workers contributions and the rate of return they earn. Social Security, therefore, will be most workers only source of guaranteed retirement income that is not subject to investment risk or financial market fluctuations.

Once someone starts receiving Social Security, their benefits increase to keep pace with inflation, helping to ensure that people do not fall into poverty as they age. In contrast, most private pensions and annuities are not adjusted for inflation.

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