You’ve been paying into Social Security since you started working, so why not take the money and run once you reach the age of 62?
The answer to this question many Americans ask is that there really is no easy answer. There are benefits to both, it is dependent on everyone’s individual situation, and it depends on the year you were born.
“Unfortunately, there is no one-size-fits-all answer for this one. The sliding scale used to calculate benefits — paying you a smaller monthly check if you retire “early” and more if you wait longer — depends on the year you were born,” says John W. Schoen, senior producer at MSNBC.com. “Your lifetime payout depends on how long you live. And if you work after your retirement age, you may have to give some of your benefits back.”
First thing’s first, head to the Social Security Administration’s website to determine when you are entitled to full benefits. This is most important step in making an educated decision on whether you’d like to take your benefits early or wait.
According to the SSA, here’s how it works if your full retirement age is 67.
If you start your retirement benefits at age 62, your monthly benefit amount is reduced by about 30 percent. The reduction for starting benefits at age 63 is about 25%[TJM1] ; 64 is about 20%; 65 is about 13.3%; and 66 is about 6.7%. Source: SSA
For some additional insight, consider the following hypothetical example presented by Forbes.com.
Colleen is 62, with a full retirement age (FRA) of 66. If she starts taking benefits at 62, she will receive $1,200 a month. If she waits until her FRA to collect, she will receive 33% more, or $1,600 a month in Social Security. If she waits until 70, her benefits will increase another 32%, to $2,112 a month. And if she were to live to age 89, her lifetime benefits would be about $38,000, or 13%, greater if she waited until age 70 to collect benefits.
So, while it’s clear that waiting is a better investment overall, it’s impossible to predict how long you will live and some people may be in a position where they understand that waiting will result in more benefits, but retiring early is a better option.
“If you need the money at 62, you may be better off collecting early and letting your tax-deferred savings and investments continue to accumulate returns,” Schoen says.
If you’ve waited this long and can hold out just a little longer, it may be best for you in the long run.
Steel Valley Investment Group offers also offers a Retirement Calculator resource as very simplistic assessment of your situation and should only be viewed as the first step to increasing your awareness to the level of savings you will need in order to plan for and enjoy the retirement lifestyle you desire.one employer.
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