Understanding Early Social Security Benefits: A Financial Perspective
You can start collecting Social Security retirement benefits at age 62, which is the earliest age available. However, opting for benefits at this age comes with significant drawbacks, including a reduction of up to 30% compared to your full benefit amounts.
The decision to take a 30% reduction in one of your most vital retirement income streams may seem unfavorable. Nonetheless, certain circumstances can make claiming benefits early a smart financial move. Here’s one compelling reason to consider starting your benefits at age 62.
Image source: Getty Images.
Claiming Early Can Help Preserve Your Savings
There are specific scenarios where claiming Social Security at age 62 is advantageous. If this choice enables you to conserve your savings, it may be the right move.
Many individuals are eager to retire at 62 or even sooner. You might need to retire at this age due to personal circumstances, such as caring for an elderly relative or young grandchildren. Health issues or a simple desire to exit the workforce are other common reasons.
Without a regular paycheck, you’ll need financial resources. You’ll typically have two options: Social Security benefits or your savings. Relying solely on savings could lead to rapid depletion of your funds, which can create financial hardships.
In such cases, claiming Social Security early is often a more prudent decision than exhausting your savings too quickly.
Avoid Rapid Withdrawals From Savings
To stretch your savings throughout retirement, it’s crucial to avoid withdrawing too much money too quickly. Excessive withdrawals can leave you with insufficient funds to generate returns, risking depleting your account.
Experts generally recommend withdrawing no more than 4% of your total retirement savings in the first year. Some financial advisors suggest being even more conservative, given that people are living longer and future interest rates are expected to be lower.
If you find that you need to withdraw more than 4% to sustain your lifestyle while postponing Social Security benefits, you may be jeopardizing your financial future. Although delaying benefits can increase your future payments, those benefits alone may not be sufficient for living expenses without additional savings.
If you are uncertain about sustaining yourself on savings alone and lack other income sources, claiming at 62 could be your best option. This is the primary reason to take Social Security early, as it can help safeguard a significant source of retirement income.
The $22,924 Social Security Boost Most Retirees Miss
Like many Americans, you might be falling short on retirement savings. However, there are lesser-known “Social Security secrets” that can potentially increase your retirement income. For instance, an easy strategy could lead to an annual increase of as much as $22,924 in benefits. By learning how to optimize your Social Security advantages, you could genuinely retire with greater confidence and peace of mind. Click here to explore these valuable strategies.
Discover the “Social Security secrets” »
The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
