3 Reasons You Might Regret Your Early Social Security Claim | Smart Change: Personal Finance

(Christy Bieber)

Retirees in America have full retirement age (FRA) for Social Security. It’s between 66 and four months and 67. Waiting for FRA to entitle seniors to receive their standard retirement benefits based on wages earned.

However, many people do not wait. Retirement checks become available much earlier and it is common to file an early claim. Unfortunately, if you choose to do that, you could regret your choice for three main reasons.

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1. You permanently reduce your benefit

Applying for Social Security benefits early will reduce the amount you receive each month.

Everyone has a standard benefit based on the average wage, but he only gets that amount if he claims benefits at full retirement age. If you want pre-FRA benefits, you can get them as early as age 62, but you will be subject to monthly early filing penalties. These lower your standard benefit. Finally, if you start checking at 62 with an FRA of 67, the reduction is a whopping 30%.

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If, on the other hand, you want the maximum monthly income, you can’t even start a benefit Bee your FR. You have to wait after that, because you can earn deferred retirement loans until you are 70. That means if you start paying before your 70th birthday, your monthly Social Security income will be lower than it could have been.

2. You may have consequences for survivor benefits

After your death, your spouse may be entitled to a survivor benefit. This is equal to the higher of the two payments coming in for both spouses.

Unfortunately, if you were the highest earner with the larger benefit and you not done delaying claiming your payment for as long as possible to maximize monthly Social Security checks would ultimately reduce the potential survivor benefits your widow(er) could have received. This can make it difficult for your partner if you are the first to transition.

3. Your periodic increases are lower because they are calculated on a percentage basis

Finally, your decision to file early for Social Security benefits will reduce the cost of living (COLA) adjustments you receive during your lifetime.

COLAs are issued when inflation signals that prices are rising. Retirees get them in most years. However, they are calculated as a percentage of current benefits. So if you could have gotten a $1,500 standard benefit at full retirement age, but cut it by 30% by claiming early, your benefit would be just $1,050 a month instead. If you get a 2% increase, you will only receive an additional $21 per month instead of $30.

Since your COLA is lower with a smaller starting benefit, your payment will never get back the amount it could have been had you waited to claim Social Security. If you end up relying on these benefits as a major part of your income — which may not happen until late in life when savings start to fall — you could really regret having your payments lower for the rest of your life. created.

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