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According to a July 2022 survey from the Nationwide Retirement Institute, 42% of Americans plan to apply for Social Security early while continuing to work. This is up from her 36% in 2021.
There are a lot of things you should know about early billing. Not only will your benefits be reduced, but they may be reduced even further if you are still working. The sooner you apply, the less money your spouse will receive if they are applying for spousal or (eventually) survivor benefits.
On the other hand, you can also have more cash on hand to meet your immediate financial needs. This can be a deciding factor. Here are some things to consider:
you will be less
If you apply for Social Security early, your benefits will be up to 30% less than if you applied at full retirement age (66-67, depending on the year you were born). And for each of her years from full retirement age to age 70 awaiting claim, your benefits increase by an additional 8%. It may not look like much in a month-to-month comparison, but it can make a big difference over time.
Ryan Salah, a certified financial planner in Towson, Maryland, said: But people might be surprised when measuring the impact over 20 to his 30 years. “Additionally, it could be over $200,000,” he says.
There is a break-even age for everyone. That is, the age at which you can make more money from a large delayed benefit than from receiving a few extra years of small checks. That point depends on when you claim your benefits, but planners agree it’s around age 80.
“The sweet spot, which is due to our financial planning software, is typically between 78 and 85,” says Salah. “It’s quite a range. Normally, if you’re going to live past 80, waiting would be more appropriate.”
If you continue to work, your bonus may be reduced.
Even if you claim Social Security early and work as a freelancer or consultant, you may lose some of your benefits if your income exceeds a certain threshold. Unless he reaches full retirement age in 2023, he will lose $1 in benefits for every $2 in income above $21,240. The formula is more lenient for the years you reach full retirement age, but it’s still something to keep in mind.
Retirement benefits are based on 35 years of highest earnings, so “in theory, subsequent payments could be augmented by additional earnings,” says David Haas, CFP in Franklin Lakes, New Jersey. . “However, unless the returns are unusually high, this rarely makes sense.”
Your Decision May Affect Your Spouse
Your spouse (current or past) may decide to withhold Social Security benefits based on your size, so your decision to get Social Security early reduces how much your spouse receives. There is a possibility.
For example, consider the common scenario where the breadwinner of the family received Social Security early and then died before their spouse. what do they live in? “Social Security is a tool,” says Haas, and delaying it can help maximize that portion of your spouse’s retirement income.
You can receive it even if you are not 62, 67, or 70 years old
It’s tempting to think that you’ve reached a Social Security milestone age and have to make a decision: claim at 62 or wait until 67 or 70? Between the ages (the age at which benefits are maxed out) there is plenty of breathable air.
“I want to remind people that they can take it at 64,” says Salah. “You can take it at 68. It doesn’t have to be those hard numbers we’re all focused on.”
This also softens people’s hearts, he says. “They’re thinking, ‘We don’t have to make this decision now, we can wait,'” says Salah. “‘If I wait another year, I’ll make a little more money.'”
be the first to receive retirement benefits
Some people join Social Security early to delay the use of their retirement savings. But the equation also works in reverse. Each year, delaying Social Security guarantees time for your benefits to increase, and unlike the stock market, which is not certain, it will increase.
George Gagliardi, CFP, Lexington, Massachusetts, said: “Do the math,” he says when considering whether you need to dig into your retirement savings. How do the numbers work if you have to get out of your retirement savings now, but get more from Social Security later?
On the other hand, if you don’t have the savings to cover the spread and can’t keep a job, you may not have the option of getting Social Security early. I have no objections,” says Gagliardi.
