Dear Rusty: I’m looking for information about retiring and starting my Social Security very soon at age 62. I’m not sure if I want to do it because I’m not sure if I can. Can you help me figure this out? Signed: Hesitant
Dear Hesitant: I know it can be daunting trying to figure out whether and when to claim your Social Security benefits. I’ll give you some of the basics:
First, you should know that if you claim your benefits at age 62, your benefit amount will be considerably reduced from what it would be if you waited longer to claim. At 62, your benefit will be about 28% less than it would be at your full retirement age (FRA) which, for you, is 66 years and 8 months. Your benefit will continue to grow by a fraction of a percentage point each month you wait, until it reaches 100% at your FRA. You can choose to delay even longer than your FRA, and your benefit will continue to grow up to age 70 when you reach your maximum benefit amount. For you, that maximum at age 70 would be about 28% more than you would get at your FRA and about 75% more than you would get at age 62. There is a considerable financial advantage to waiting to claim.
If you continue working, and you claim at age 62 (or at any age before your FRA), you’ll be subject to Social Security’s “earnings test,” which limits how much you can earn before they take back some of your benefits. Starting at age 62 and continuing until the year you attain FRA, there will be an annual limit to your earnings (the 2021 limit is $18,960) and, if you exceed that, SS will take back benefits equal to $1 for every $2 you are over the limit. That could mean you will go some number of months without receiving benefits until Social Security recovers what you owe because you exceeded the earnings limit. Of course, if you fully retire from work now that is not a concern, but it may influence a future decision to return to work. Social Security’s earnings limit no longer applies after you reach your full retirement age.
Your marital status also comes into play. If you are married, and your benefit as a spouse will be more than your personal benefit will be, then there are some special considerations which might affect your claiming decision. Generally, if your spousal benefit will be more than your own benefit (from your lifetime work record), and your husband isn’t yet collecting benefits, it’s often wise to claim your own earlier and take the larger spouse benefit later. Of course, if you’re not married you need only be concerned about your personal benefit from your own lifetime earnings record and waiting for a larger life-long benefit, if possible, is often the most prudent choice.
Those are the basic things you should consider when trying to decide when to claim your benefits. But your need for the money now, plus your health and life expectancy are also key to your decision. If you need the money earlier to make ends meet, and you won’t be severely affected by the earnings limit, then claiming early can be your most prudent choice. Or, if you are not enjoying good health and have reason to believe that you won’t live at least until today’s average age for a woman (about 87), then that also suggests claiming early. But, if you are working and don’t really need the money, and you are in good health and expect to live to a ripe old age, then waiting longer to claim a higher benefit is usually a better strategy.
The reality is that everyone’s personal situation is different and there is no single answer to the question of when to claim Social Security. I hope the above gives you at least a starting point for your decision.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at [email protected].