Anyone eligible to collect Social Security benefits can choose to receive them at full retirement age or as early as 62 years old. Many people retire early and need their benefits. However, collecting Social Security sooner than usual could be problematic. Although there are many advantages, you could also face a range of issues.
The Social Security Administration calculates a person’s monthly benefit payment based on how many years they worked and the credits they earned while paying into Social Security taxes. The longer you work, the more money there is to collect. However, there’s a major difference between waiting until you turn 65 and applying for benefits at 62.
Pros of Early Social Security
Multiple advantages exist if you decide to collect Social Security when you turn 62. They include:
- Money for expenses – If you can’t afford your daily living expenses, applying for early benefits could help. The monthly payments could cover housing, food, healthcare, and other necessary costs.
- Invest – Some people want to invest in their future. Instead of waiting to begin collecting benefits, they start early so they can put the money away for an unexpected expense.
- Life expectancy – Unfortunately, by the time many people retire, they don’t have many years left to enjoy their Social Security benefits. If you suffer from a terminal illness, you might not have much time to spend with friends and family. Applying for benefits at 62 means you can spend the money on family vacations and other things you want to experience before you die.
- Inheritance – You might not want to use the funds in your pension, 401(k), savings account, or IRA. You can keep the money where it is by only depending on your Social Security payments for your living expenses so your heirs can inherit those accounts.
Cons of Taking Social Security Early
Although early retirement might seem like the dream scenario, collecting Social Security too soon has drawbacks. The most common disadvantages include:
- Reduced benefits – If you wait until you turn 65 years old, you can receive the full available benefits each month. However, applying for Social Security at 62 means your monthly payments are at a reduced amount. That could be an issue if you have significant expenses to cover.
- Employment penalties – You might choose to retire early but decide to re-enter the workforce occasionally or part-time. Unfortunately, it can negatively affect your monthly payments. For every $2 you earn above the annual limit, the Social Security Administration will deduct $1 from your benefits.
- Lower COLA – Social Security cost of living adjustments (COLA) are lower for anyone collecting benefits early. Instead of receiving a percentage increase based on 2022 rates, your payments will decrease. It could leave you with less money than you would have received for inflation if you waited until you turned 65.
Contact a San Jose elder law attorney immediately if you’re considering applying for Social Security benefits before you reach full retirement age. We can advise you about your options and discuss how collecting early payments could impact your life and finances. You need an experienced lawyer to assist you with the process, so you can protect your financial future. To schedule an appointment at one of our offices located throughout the state of California, contact us at (800) 244-8814.