Welcome to your “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about Social Security; specifically, when you should begin your benefits:
- At the earliest possible age, 62
- Your regular retirement age, 66 or 67
- The maximum age, 70
Watch the following video and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
You also can learn how to send in a question of your own below.
For more information, check out “Maximize Your Social Security” and “10 Things That Could Hurt Your Social Security Payments.” You can also go to the search at the top of this page, put in the words “Social Security” and find plenty of information on just about everything relating to this topic.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this two-minute answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.
Let’s get to today’s question. It comes to us from Alex:
“I’ve read on your site and others that I should wait until 70 to take Social Security. If you can afford to retire at 62, why not? You’re not getting any younger!”
Well, Alex, you’re absolutely right: I’m 62, and I’m definitely not getting any younger!
I’ve got three things for you.
Thing No. 1: How Social Security works
Let’s start with a quick review of Social Security.
You can take early benefits when you’re 62 and full benefits at your full retirement age, which is typically 66 or 67, depending on when you were born. Or, you can get enhanced retirement benefits if you wait until age 70.
A quick example will bring this into focus. Let’s say you’re eligible for $1,000 per month at full retirement age. If you take it early at age 62, you might get $750 per month. If you wait until age 70, you might get a little over $1,300.
So, now you can see the difference by either taking it early or waiting until the last possible moment, which is age 70.
Thing No. 2: There’s no difference
Here’s something most people don’t realize: Based on average life expectancy, you should receive exactly the same amount of money by taking a lower benefit at age 62, or an enhanced benefit at age 70. You’re not getting penalized by taking it early, and you’re not getting rewarded by taking it late.
Instead, it’s simply based on mortality tables. Over their lifetimes, the person who starts at 62 with a lower payout should receive the same overall amount of money as the person getting larger checks beginning at age 70.
The point is that you’re not being an idiot by starting at 62, and you’re not brilliant because you hold out. Rather, what’s best depends on lots of individual variables, including when you’d like to stop working, what your needs are and your longevity as suggested by your family history. There are also other things to consider when there’s a spouse involved, since one spouse can receive benefits based on the other spouse’s benefit. That’s why it can be a good idea to get some professional Social Security advice.
Thing No. 3: Deciding what to do
Most Americans take Social Security at age 62; very few wait until age 70. There are perfectly good reasons why.
Many people may not be able to wait because they need the money. Or, they may simply feel like retiring at 62. In other words, a lot of people want their money as soon as they can get it, and there is nothing wrong with that.
Personally, I’ll be waiting. Why? One reason is because I’m still working and don’t want my benefits reduced.
If you take benefits before full retirement age, earning money over a specified cap will reduce your benefits by $1 for every $2 you earn. The cap changes as you age, but here’s an example: I’m 62. For every $2 I earn over $17,040 this year, my benefits will be reduced by $1. So, if I took Social Security this year, I’d be leaving a lot of money on the table. (It’s money I’d get back, however, when I start receiving benefits at 70.)
Another reason I’ll most likely wait until 70 is because I’ll probably work until then and won’t need the money. My family history would suggest I’ll live a long life. So, while I can’t know for sure, it’s possible I can wait until 70 and enjoy those fatter checks for many years thereafter.
That’s me. It may not be you.
A few years ago, one of my best friends asked if he should take his pension early, and I said, “Hell, yes.” Why? Because he wasn’t in great shape, health-wise. Both of his parents died young, his siblings died young, and he really needed the money. So, my advice to him was, “Take it as soon as you can get it.”
He died one year later.
The point: For some people it’s a great idea to take Social Security early and for some people it’s a great idea to wait. The reason you’ll often hear people like me say it’s a great idea to wait is simply because you’re going to get more money by waiting. But don’t ever think there’s a single right answer to this question. There isn’t.
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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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