When it comes to Social Security, one of the biggest decisions you’ll face is when to start collecting your benefits. Many people wonder, “Is it better to collect Social Security at 62 or 66?”
This decision can have a huge impact on your financial well-being during retirement. With over 51 million retirees relying on Social Security, it’s a critical source of income for many.
The choice between collecting at 62 or waiting until 66 can make a significant difference in how much you receive over your lifetime.
In this article, we’ll take a deep dive into this topic to help you make the most informed decision.
Whether you’re planning for an early retirement, or you’re thinking of waiting a bit longer, understanding the benefits and trade-offs of each age is crucial.
This comprehensive analysis will provide a clear-cut answer, offering insight into how your claiming age affects your financial future, and why it’s essential to weigh your options carefully.
Is It Better to Collect Social Security at 62 or 66?
To give a straightforward answer to this critical question: waiting until 66 (or your full retirement age) will generally result in higher monthly payments.
However, the best choice for you depends on various factors like your health, financial situation, and retirement plans.
Collecting at 62 means getting benefits earlier, but it comes with a significant reduction in your monthly payout—about 25-30% less than if you wait until your full retirement age of 66.
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For many, waiting until 66 ensures they get the full retirement benefit they’ve earned over their lifetime. On the other hand, if you need the money earlier due to health reasons or job loss, starting at 62 might be the better choice despite the lower monthly amount.
We’ll explore the key factors you should consider when making this decision, so you can determine what works best for you.
How Social Security Benefits Are Calculated
Before you can decide when to start collecting benefits, it’s important to understand how Social Security calculates your monthly check.
There are four primary factors that go into this calculation: your work history, earnings history, full retirement age, and claiming age.
These variables determine how much you’ll receive and can affect your long-term financial stability.
- Work History: The Social Security Administration (SSA) calculates your benefits based on the number of years you worked. Specifically, they look at your 35 highest-earning years. If you haven’t worked for at least 35 years, those missing years will be counted as zero, which lowers your average and, therefore, your benefits.
- Earnings History: Your earnings over your working years, adjusted for inflation, also play a significant role. Higher earners typically receive larger benefits, but the SSA also caps how much income is subject to Social Security taxes.
- Full Retirement Age: Your full retirement age is determined by the year you were born. For most people, this is around 66 or 67. Waiting until this age means you’ll receive 100% of your benefits.
- Claiming Age: Finally, the age at which you claim Social Security greatly influences how much you’ll get each month. Claiming early at 62 results in reduced payments, while delaying until after your full retirement age (up to 70) can increase your benefit by as much as 8% per year.
The Pros and Cons of Collecting Social Security at 62
If you choose to collect Social Security at 62, the main advantage is that you can start receiving money sooner.
For people who retire early, have significant health concerns, or need additional income to cover living expenses, this can be a great option. In 2022, about 27.3% of new claimants chose to start receiving benefits at 62.
However, the downside is that you’ll receive significantly less money each month compared to waiting until 66 or later.
The reduction can range from 25% to 30%, depending on your birth year. This reduction is permanent, meaning even if you live into your 80s or beyond, you’ll continue receiving the lower payout for the rest of your life.
Additionally, if you start collecting at 62 and continue to work, you may face penalties under the retirement earnings test, which reduces your benefits if you earn above a certain amount.
The Benefits of Waiting Until 66
Waiting until age 66 to collect Social Security has a major benefit—you’ll receive your full retirement benefit without any reductions.
For many retirees, this can mean hundreds of extra dollars per month compared to claiming at 62. This increase in monthly income can make a big difference, especially if you live a long life.
One of the biggest advantages of waiting is that it can help you maximize your lifetime benefits. If you live into your 80s or 90s, those higher monthly payments can really add up, providing you with more financial security.
Moreover, there are no penalties if you continue working after 66, which allows you to supplement your income even further.
The downside of waiting is that you miss out on receiving benefits during the early years of retirement. If you pass away sooner than expected, you could receive less total Social Security income than if you had started at 62.
However, if you’re in good health and have other sources of income, waiting until 66 can often be the better financial decision.
Health and Longevity: Key Factors to Consider
One of the most important things to consider when deciding when to claim Social Security is your health and expected longevity.
If you’re in good health and expect to live well into your 80s or beyond, waiting until 66 or even 70 can maximize your lifetime benefits.
On the other hand, if you have a chronic illness or family history of shorter lifespans, claiming earlier might make more sense.
Many retirees underestimate how long they’ll live. With advances in healthcare, people are living longer than ever, and it’s important to plan for a retirement that could last 20 years or more.
If you expect to live a long life, the financial advantages of waiting until 66 or later to collect Social Security can be significant.
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Conclusion
Ultimately, the decision of whether to collect Social Security at 62 or 66 comes down to your personal circumstances.
If you need the money sooner or have health concerns, collecting at 62 might be the best option.
However, if you can afford to wait and want to maximize your benefits, holding off until 66 or even later can pay off in the long run.
There’s no one-size-fits-all answer, but by considering your financial situation, health, and retirement plans, you can make the decision that best fits your needs.
Whether you choose 62 or 66, understanding the trade-offs will help you get the most out of Social Security.
FAQ’s
Is it better to collect Social Security at 62 or 66?
It depends on your individual circumstances. Generally, waiting until 66 (or your full retirement age) allows you to receive 100% of your benefits. Collecting at 62 results in a permanent reduction of about 25-30%. However, if you need income earlier or have health issues, starting at 62 might be the better option. For those in good health who expect to live longer, waiting until 66 often results in more lifetime benefits.
What happens if I start collecting Social Security at age 62?
If you begin collecting Social Security at 62, your monthly benefits will be permanently reduced by about 25-30%, depending on your birth year. The reduction is permanent, meaning you will receive smaller checks throughout retirement. However, you get to access your benefits earlier, which can be helpful if you retire early or have financial needs.
What are the benefits of waiting until 66 to collect Social Security?
By waiting until 66, you receive your full retirement benefit without any reductions. This provides a higher monthly income for life, which can be especially beneficial if you live longer. Additionally, waiting until 66 eliminates penalties if you continue working, allowing you to maximize your benefits while potentially earning other income.
Can I work while collecting Social Security at 62?
Yes, but if you start collecting Social Security at 62 and continue to work, your benefits may be reduced under the retirement earnings test. The Social Security Administration (SSA) withholds part of your benefits if you earn over a certain limit. However, once you reach your full retirement age (66 or 67), the SSA no longer applies this reduction, and you’ll receive your full benefit regardless of earnings.
How do my health and longevity affect when I should collect Social Security?
Your health and expected lifespan are key factors in deciding when to collect Social Security. If you are in good health and expect to live into your 80s or beyond, waiting until 66 or later can help maximize your lifetime benefits. However, if you have health concerns or a shorter life expectancy, collecting benefits earlier at 62 may be the better choice.