Few things in retirement are as pivotal as deciding when to start collecting Social Security benefits. If you’re considering joining the nearly 600,000 retired workers who currently collect benefits at the earliest age, 62, you may want to know exactly what you’re getting into first.
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According to data from the Social Security Administration, as of the end of last year, those beneficiaries received an average of $1,298 per month. Compare that to the roughly 2.1 million retired workers at the full retirement age (FRA) of 66, who collected average checks of $1,740 — sobering evidence of the value of delaying your Social Security withdrawals if you can afford it.
Is the average benefit at 62 enough?
Many retirees are keen to access Social Security funds after paying into the program their entire careers through the payroll tax. Social Security, however, rewards delayed gratification. The age at which you start collecting retirement benefits has a significant impact on the amount you receive. Here’s a breakdown:
Claiming at 62: If you claim benefits at age 62, your monthly check is reduced by up to 30% compared to what you would receive at your full retirement age. This reduction is permanent.
Claiming at FRA: If you wait until your full retirement age — 67 for people who turn 62 in 2024 — you’ll receive 100% of your calculated benefit based on your earnings history.
Claiming at 70: If you delay benefits past your full retirement age, you can increase your monthly benefit by about 8% for each year, up to age 70.
But will claiming at 62 be enough to help you get through retirement? It depends. No two retirees are the same. How much income you’ll need is based on a number of factors, including your lifestyle, health care needs and where you live. Financial planners generally recommend aiming to replace about 70% of your pre-retirement income to maintain your standard of living.
The average benefit at age 62 is unlikely to be sufficient for many retirees if they’re expecting Social Security to be their sole source of income. Over the course of a year, that monthly average amounts to around $15,576. This highlights the importance of having additional sources of retirement income, such as savings, pensions or part-time work.
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Strategies to bolster your financial position
If claiming Social Security retirement benefits at the earliest possible time isn’t enough to cover your expenses, here are some strategies to improve your financial position:
Delay Social Security: If possible, delay claiming benefits to increase your monthly check. Waiting until age 70 can significantly boost your benefit amount.
Boost your savings: Increase contributions to retirement accounts like 401(k)s, IRAs, or Roth IRAs. Take advantage of catch-up contributions if you’re over 50.
Work longer: Continuing to work, even part-time, can provide additional income and provide some wiggle room to delay claiming Social Security benefits. It also means spending fewer of your retirement assets and possibly adding to your savings.
Reduce expenses: Look for ways to cut costs, such as downsizing your home, moving to a more affordable area, or eliminating unnecessary expenses.
Invest wisely: Consider working with a financial adviser to create a diversified investment portfolio that aligns with your risk tolerance and retirement goals.
Use home equity: For homeowners, tapping into home equity through a reverse mortgage or home equity line of credit can provide additional funds. This should be done carefully, however, to avoid exacerbating your income challenges with new debts.
Health care planning: Plan for health care costs by exploring options like a Health Savings Account and long-term care insurance.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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