As a senior, you get plenty of freedom when it comes to claiming Social Security. You’re entitled to your full monthly benefit based on your earnings history once you reach full retirement age (FRA). FRA is either 66, 67, or somewhere in between, depending on when you were born. But you can also file for benefits before FRA, or delay benefits past FRA to boost them in the process.
The earliest age you’re allowed to claim Social Security is 62, and not so surprisingly, it’s the most popular age to file. But if you’re thinking of taking benefits at that point in life, be sure you know what you’re signing up for. Here are a few specifics you must be aware of.
1. You’ll reduce your monthly benefit by up to 30%
The Social Security Administration (SSA) won’t give you early access to your money for nothing in return. You can claim Social Security before FRA, but for each month you file early, your benefits get reduced. And if you file at 62 with an FRA of 67, you’ll be looking at a 30% reduction on a monthly basis, which is the biggest hit your benefits can take.
2. You’ll risk having benefits withheld if you’re still working
The SSA allows you to collect benefits and receive income from a job at the same time. If you do so after reaching FRA, your benefits won’t be impacted at all. But if you haven’t yet reached FRA, you’ll need to be careful in this scenario — earn too much, and you’ll risk having a portion of your benefits withheld.
The amount of money you’re allowed to earn on an annual basis without affecting your benefits varies from year to year. In 2020, you can earn up to $18,240 without having benefits withheld, but from there, you’ll have $1 in Social Security withheld per $2 of earnings. You do get a higher income threshold to work with if you’ll be reaching FRA at some point during the year — but if you’re thinking of claiming Social Security at 62, that won’t be the case, and so you’ll need to either limit your earnings to $18,240 or otherwise risk having benefits withheld.
Thankfully, the amount that’s withheld isn’t lost forever; it gets added back into your benefits once you reach FRA. But the reduction in benefits you face by filing early does still apply, so if you’re able to earn enough to avoid claiming Social Security at 62, it certainly pays to try to wait.
3. You can undo your filing if you regret your decision after the fact
Claiming Social Security at 62 means locking in a reduced monthly benefit for life — that is, unless you manage to undo that filing on time. The SSA gives you one do-over in your lifetime, and if you go that route, you’ll have the option to file for benefits again at a later point and collect a higher amount each month. But to snag that do-over, you must withdraw your benefits application within a year, and also repay the SSA every dollar in benefits it paid you within a year.
The latter isn’t an easy thing to do, so generally speaking, you should assume that the amount of monthly Social Security income you start out with will be the same amount you collect for life. But if repaying that money is possible, then undoing your filing could make for a more comfortable financial situation throughout retirement.
If you’re thinking of claiming Social Security at 62, you’ll certainly be in good company. But keep these points in mind before making that your final decision.
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