The Amount of Social Security Growth Past the Age of 62
The Amount of Social Security Growth Past the Age of 62
Social Security plays a significant role in many retirees' financial plans, leading to queries like how much do Social Security benefits increase after age 62? The answer depends on variables such as your birth year and the age you decide to collect Social Security. We'll dive deeper into this below to help you choose the ideal age for claiming benefits.
Grasping Age and Social Security
Grasping Age and Social Security
The government establishes a Full Retirement Age (FRA) for each individual based on their birth year. This is the age at which you become entitled to your full Social Security benefit, depending on your work history. For individuals born in 1960 or later, FRA is 67, although you're not obliged to claim benefits at that age.
You can start collecting Social Security as early as age 62, but doing so will decrease your payments up to 30%. Delaying benefits increases them a little each month, as shown in the table below, until you reach your maximum benefit at 70 years old.
To give you a sense of the impact this could have, let's say you have an FRA of 67 and are entitled to a $2,000 benefit at 62. Delaying benefits until age 70 would earn you approximately $3,543 per month. And you don't need to wait that long to see significant adjustments to your payments.
Delaying benefits by one year could increase the size of your benefit by 5% to 8%, depending on your age. But this doesn't mean it's the right choice for everyone.
Advantages of Collecting Social Security at 62
Advantages of Collecting Social Security at 62
Collecting Social Security at 62 means a longer period of benefits. This is why it remains a preferred age to apply. Seniors who wish to retire in their early 60s but cannot afford to do so on their own can supplement their personal savings with Social Security to help them cover their expenses.
Claiming early can also be beneficial if you don't anticipate living long. You'll likely receive a larger lifetime benefit this way. If you delay benefits, there's a risk you might wait too long and miss out on Social Security entirely.
Perks of Working Past 62
Perks of Working Past 62
Delaying Social Security means an increase in your monthly payments, as explained above. This could result in a larger lifetime benefit for those who live into their mid-80s or beyond. Larger monthly payments also mean larger Cost-of-Living Adjustments (COLAs). These are annual Social Security increases that all beneficiaries receive to keep their checks in line with inflation.
When you delay Social Security until your FRA or beyond, you no longer need to worry about the earnings test. Those who work while claiming Social Security before their FRA could lose a portion of their benefits if their annual income is too high. But the money isn't permanently lost. When you reach your FRA, the government recalculates your benefit to account for the amount previously withheld and your new checks will be larger. For some, however, this is a hassle they'd prefer to avoid.
Should you Collect Social Security at 62?
Should you Collect Social Security at 62?
When you start Social Security is a personal decision. You must assess your financial situation and life expectancy to determine the best course of action. If you plan to delay benefits, you'll need to ensure you can cover all your expenses until you're ready to claim. You might do this with a job or rely on your personal savings.
It's wise to have a plan for when you'll claim, even if you're far from retirement. Knowing when you'll apply can help you project how much you'll receive from the program, and you can use that information to estimate how much you need to save for retirement on your own. But you must be prepared to adapt as the situation demands it.
Social Security's trust funds are projected to deplete within the next decade or so. If this happens, the government won't be able to pay out all scheduled benefits unless it takes steps beforehand to remedy the deficit. We can't predict what will happen in the near future, so we need to do our best to save on our own and modify our Social Security strategy as needed over time.
Whichever claiming age you choose, be sure you understand the implications of your decision. It's challenging to change your mind once you've already applied, so it's best to wait until you're confident that you're ready.
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Having a solid understanding of your retirement finances is crucial. Evaluating the impact of collecting Social Security at different ages, such as 62, can help you make informed decisions. For instance, if you start receiving benefits at 62, your payments may be reduced by up to 30%, but you'll have a longer period of receiving benefits. On the other hand, if you can postpone your retirement and wait until your Full Retirement Age or beyond, your monthly payments will increase, leading to higher Cost-of-Living Adjustments and potentially a larger lifetime benefit.