3 Things Everyone Planning to Claim Social Security at 62 Should Know
Claiming at 62 is the right move for some people, but there are drawbacks.
When considering claiming Social Security benefits at 62, there are several key factors to weigh. First, it's important to understand that claiming early comes with penalties that can significantly reduce your monthly checks. For instance, if you sign up at 62 instead of your full retirement age (67), you could see a reduction of up to 30% in your benefits.
However, this does not necessarily mean claiming early is the wrong choice for everyone. It could be a viable option if you're unable to cover your living expenses without assistance, and it might even result in your largest lifetime benefit if you have a shorter life expectancy.
Another crucial aspect to consider is the Social Security earnings test. If you earn more than a certain amount from your job while claiming benefits at your full retirement age, the government will withhold money from your checks. In 2026, you'll lose $1 for every $2 earned over $24,480 if you're under your FRA all year. For those who reach their FRA in 2026, the limit increases to $65,160, with a withheld amount of $1 for every $3 earned.
These restrictions will increase in subsequent years, reaching $25,560 and $67,920, respectively, in 2027. Although the money withheld is not lost permanently and a one-time benefit boost is granted at your FRA to compensate, the earnings test can still complicate your finances in the short term. Therefore, it's essential to factor this into your decision-making process if you're thinking about signing up at 62 while still employed.
Lastly, it's worth noting that the Social Security Administration allows you to withdraw your benefit application within the first 12 months of applying if you decide to change your mind. However, you can only do this once, and you must repay all the benefits received thus far. This option, while available, can be challenging to navigate and repay, making it crucial to carefully consider your starting age before proceeding.
Before making any decisions, ensure you're well-informed about the trade-offs of claiming at 62, and consider seeking guidance from reputable sources, such as The Motley Fool's premium services.
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