Officially, retirement funds can be withdrawn or collected starting at age 62. What happens? If we follow this premise, we could be losing up to 30% of our income. On the other hand, delaying claiming until you are 70, which is past full retirement age, will result in an even higher benefit amount. As such, being strategic about when you begin claiming during the 8-year period could make a difference to your retirement income and, by extension, your quality of life.
At age 62, you will lose approximately 30% of their benefits
Let’s remember that the official retirement age has changed. Next year, the retirement age will rise to 67. In 2025, the retirement age for those born in 1959 is 66 years and 10 months. Now, with this regulation, if a retiree begins applying for a pension at age 62, they will lose approximately 30% of their benefits, which will reduce their monthly salary to $700. Meanwhile, if they postpone the application until age 70, the benefit will increase by 8% annually. By delaying the application until age 70, the benefit would increase by 132%, raising the monthly salary to $1,320.
The question is, can a person with these characteristics really afford to extend their retirement age? Let’s imagine that not everyone has an ideal office job that doesn’t involve physical effort (without underestimating office jobs). But the fact is that a person who has worked their entire life on construction sites or as a hotel cleaner may find it physically impossible to extend their retirement age. At 70, the physical detriment is obvious. In that case, does the poor person simply become poorer? Just a thought.
The person have the option of suspending their benefits if already started
Starting to collect at 62 can provide more leeway, but with smaller payments. Waiting until 70 provides a higher monthly income, but requires bridging the gap. That bridge, the way to cover the intervening years, is where the strategy lies, explains Preston Cherry, founder of Concurrent Wealth Management.
Still, there is one more option. If the applicant applied for benefits early but is reconsidering their decision after a while, they have the option of suspending their benefits. This way, benefits will have more time to accrue until they reach full retirement age. Furthermore, if they filed their claim within the last 12 months, their claim can be withdrawn. However, they will have to repay the benefits received during this period, which will essentially restart their claim.
“53% of Americans say they have limited knowledge about Social Security”
Many citizens are unaware of this small detail about retirement plans. It’s not just about knowing the retirement age, but also how taking early retirement can affect the income you’ve worked for your entire life. Literally. An Allianz Life survey revealed that “53% of Americans say they have limited knowledge about Social Security or how it fits into their retirement plan.”
Retire early, late, or just in time. Either way, you win or you lose. On one hand, you can gain time, quality of life, family, peace of mind, joy… while losing a percentage of the money everyone deserves. On the other hand, you can wait until your desired age and thus tie up all the loose ends to have the pre-calculated income. That’s the decision, because the rule is how it is.
