The case for choosing Social Security benefits at age 62
Many Social Security experts opine that if you don’t need the money now, and you are in good health, then their advice is to wait at least until you are 66 years old, or 70 years old if you can, to receive higher benefits.
The experts say that by waiting, you earn a higher monthly benefit, and that benefit, like all Social Security retirement benefits, is indexed for inflation. So waiting helps ensure you have more money in your later years.
But these experts also stipulate that government studies show that retirees, on average, receive the same amount of money in Social Security benefits, regardless of when they file. So don’t short yourself out now for a possible brass ring sometime in the future.
Do you really want more money in later years versus 75% at 62? At 62, you are still young enough to travel, play a great round of golf, use other savings to live on and in times with normal interest on savings, you would have to live to the ripe old age of 80, before collecting Social Security benefits at a later age, would break even with taking 75% of the benefit at age 62.
And what will most of us be doing at 80; why paying the increased Social Security benefits for home care or nursing homes, medical providers and medication. I’ll take the benefits that I and my company have paid into for 42 years and deal with old age in my eighties.
Who winds up with the higher benefits then – the assisted living facilities, that’s who.
What the experts also leave out is that benefits could change tomorrow with Social Security going bankrupt, the Sequester debt ceiling agreements and the rising national debt, which could reduce Social Security benefits and all your future planning goes right out the nursing home’s windows.
One must also consider that if you are using up savings while waiting for the bigger Social Security benefits, it will drain money from your heirs. Social Security will not exist for them if you die and your savings will, so collect and spend the Social Security instead.
Also, you pay taxes on 100% of IRA or 401K savings withdrawals, but Social Security dollars will be at least 15% tax free and if total income is under a certain amount only 50% of Social Security is taxed. You can pass on IRA’s and 401Ks to your heirs and it can be accomplished to minimize how much the government will eventually get their hands on.
For some retirees, with the Required Minimum Distribution after 70 and 1/2 years of age, it might be better to use some of your IRA earlier, supplementing your Social Security, have a great retirement and reduce your tax burden later.
An important thing to consider is not simply how to maximize your Social Security, but all your retirement dollars throughout your life. You also want to maximize your life decisions, your retirement goals and not just your Social Security benefits.
The main reason to wait to collect your Social Security benefits is if you are still working, and remember to trust your own planning versus the government’s political agenda!