Have you ever wondered if you should be claiming social security earlier than the supposed timeframe you have?
A lot of Americans will rely on Social Security when the time comes for retirement. Be it that they will depend on it to add more to their retirement fund or that it will be almost their only income, financial aid is still important to many. Yet, while you can start receiving them at the age of 62, many people are scared to do so because you will not be able to start receiving them in full. That being said, it should not be as much of a deterrent as many people make it out to be.
You can start receiving social security benefits once you know the full retirement age (FRA), and if you don’t know it, you can always use the official government site in order to calculate it. That’s also where you will be able to get all the information you may need about social benefits and even about the FRA: how much you can get and how much more you will get if you start taking out payments after the FRA.
Despite this, you should know that whether you want to claim or delay is completely up to you. You don’t have to worry whether you are making a mistake or not, as everything is about your choices and your preferences. As long as you think about all of the factors that impact you and your income, you should make the choice that is best for you.
This is why, if you believe you may want to take out social security early but are not yet convinced that this is the best option for you, we have gathered some of the reasons why many other Americans make that choice. That way, you can put everything in balance and make the best choice for you!
#1 You still have debts to pay
Let’s be honest. It sounds like the best thing to retire and no longer have to worry about paying any debt. Whether it be a credit card debt or a mortgage, sometimes it is the best idea to have all of that paid off before you retire. This is why, if your debt has a high rate, claiming your Social Security early may be in your best interest.
It is all dependent on your interest rate and how big it is. If you have a credit with 8% per year earned for each year you delay your retirement after you reach the FRA, then waiting for the increased monthly benefits may not be worth it in the end. Claiming your Social Security benefits early will help you reduce or even pay off your debt faster, which in turn will give you more time to enjoy the retirement benefits and the future.
A lot of senior Americans choose to claim social security in order to be able to pay off their debt faster, so even with the reduced amount, it may just be the best choice for you in order to forget the stress of debts further into your golden years.
#2 Your life expectancy is shorter than average
The government has always encouraged seniors to delay claiming their Social Security benefits, especially if we look at the way they increase the monthly payment the longer someone waits.
For example, if you reach the age of 62 and you start to claim the benefits earlier than your full retirement age, which happens to be 66, then you will only be receiving 75% of how much you would get in full at 66. So, if you were entitled to get $1,000 at 66, you will only be receiving $750 by claiming Social Security early at 62.
While it seems great to wait in order to get a bigger sum once you reach the FRA, you also have to keep on waiting for another few years. If your health is not the best and you cannot predict when the worst could happen, then waiting will not be the best choice for you. To break even in our example, if you take Social Security early, that means after you turn 66 and start getting the full $1,000, you will have to wait until 78, which is another 12 years.
Sometimes, if your life expectancy is lower, you will end up getting more benefits if you claim them as soon as possible, as opposed to waiting. Assess your health and be realistic about it, then claim your benefits as soon as you can.
#3 You work part-time
If you’re considering claiming Social Security, but you are in a situation where you are working part-time and are under the full retirement age (FRA), then you should keep in mind that your benefits will be reduced if your income is over the annual limit. For example, in 2022, if you are under the FRA but claim benefits, your benefits will be reduced by $1 for every $2 your work earnings exceed $19,560.
If you are going to reach the FRA in 2022, then the Social Security Administration will be holding back $1 in benefits for every $3 you get over $51,960 up until you turn the full retirement age.
Despite the complicated mathematics involved, if you have been working part-time in order to make ends meet and because you need the income to live, then claiming the Social Security benefits early may just be the greatest choice for you.
#4 You have amassed 35 years of service credit
Generally speaking, the amount you will receive in benefits from the Social Security Administration is based on how much you have earned in the last 35 years as an income from working and in which years you had the highest compensations. If you are close to reaching the peak earning age and you see an increase in those earnings, it would be good to defer your benefits for another few years in order to see bigger benefits.
Yet, if your average earnings are not going to go up in the foreseeable future for whatever reason (you’re a part-time worker or you are already considering early retirement), there is no need to keep on waiting. You’ll not be losing out on any opportunity to increase your benefits, as there is nothing to justify that increase. The only drawback would be reduced Social Security benefits if you haven’t reached the FRA, but otherwise, sometimes it’s a fair exchange for some peace of mind earlier in your golden years.
#5 You’re setting up for end-of-life care
The bad news is that once you pass away, the Social Security Administration will no longer be paying you your benefits. If you die before you even start collecting the benefits, because you were trying to wait and get a better amount, you will lose any chance of ever seeing that money!
This is why you should rethink when you will start taking them out. If you are in good health, it is harder to predict when your health will start to turn for the worst. However, if you are chronically, seriously, or terminally ill, then delaying getting your benefits is not the best choice and, in the end, stalling may not have been worth it. So assess your situation and claim Social Security early if that is the wisest decision for you!
#6 There’s no one else to claim them
If the worst happens and you pass away, some of your relatives may claim your Social Security benefits in your stead. This usually includes your spouse and any minor children you still have in your care, or if you have been caring for a disabled minor child.
In this case, your partner can get between 71.5% and 100% of your benefits, depending on their age and when they start to get them. while a disabled minor could be entitled to 75% of the amount you would have been able to get.
However, there is a chance that there is no one who could be qualified to take out your benefits, and if you know that you are in that category, you should consider early retirement. After all, if everything goes well and you complete your financial investigation, why not retire earlier and relax in your golden years if you have reached the minimum retirement age?
You worked hard your whole life, you deserve to relax early!
#7 You are no longer able to work
We all have a retirement plan, and while we do our best to follow it, some things are bound to fall through. You may have made the decision to wait until you’re 70 to take out social security benefits in order to maximize the amount you can get. However, there are always unexpected factors that can derail your plans, and they are usually beyond your control!
If you’re unemployed and struggling to find another job, it might be in your best interest to take out those benefits if it truly doesn’t seem like there will be any other opportunity on the horizon. Not to mention, if that is not the case but you keep working after you have reached retirement age, then you can easily overwork your body and mind and even put yourself at a health risk if you’re doing a lot of manual labor.
It’s sometimes better to know when to call it quits, even if it comes sooner than we expect it, in order to be able to live a healthier and more relaxed life.
#8 You have started a business!
You may be on the side of the people who cannot wait for their golden years in order to retire and dedicate their time to relaxing, picking up old hobbies, or even traveling the world. However, there is also another big chunk that decides to take advantage of the free time they have and gather their strengths to start their own business, as they have always wanted.
If you have been toying with the idea that you could open the small business of your dreams, but you are worried it will not be profitable enough for you to live comfortably until it establishes itself, this could be your chance to start. If you claim Social Security earlier, you can use that money to help you launch your business and even out your business plan without seeing a dent in your funds.
After all, if everything goes as planned, the revenue you will get from the business will equal the benefit reduction that will be applicable.
In the meantime, if you’re trying to cut down on expenses, here are the best ways in which you can limit certain expenses and grow out your retirement fund!