11 Surprising Reasons To Claim Social Security Early—But Are They Worth The Risk? – Financial Freedom Countdown

Deciding when to claim Social Security is usually driven by the goal of maximizing benefits. Financial planners often recommend delaying your claim to lock in the highest monthly payment. Your benefits are based on your lifetime earnings, with full payouts available at your full retirement age (FRA), which ranges from 66 to 67 depending on your birth year. Claiming early before your FRA results in a permanent reduction in monthly benefits, while waiting past FRA leads to a permanent increase.

However, the decision goes beyond just maximizing your check. Factors like health, family situation, and immediate financial needs can play a crucial role in determining the best time to claim.

You Have Poor Health

There comes a time known as the breakeven point when starting a larger monthly payment later will eventually surpass the total benefits you’d collect from claiming early with a smaller payment.

However, this breakeven point only matters if you live long enough to reach it. If you don’t expect to live that long due to health issues, you may receive more in total benefits by claiming Social Security early. An early claim can be a good option for income and to help offset higher medical expenses, particularly for a single person who doesn’t need to consider the impact on a surviving spouse.

However, if you’re married and your benefit is much higher than your spouse’s, it could be beneficial to delay your claim to provide a larger survivor benefit for your spouse.

You Have a Job Loss

If you encounter a financial crisis like a job loss and are at least 62 years old, it might be wise to claim Social Security early. This can provide you with immediate funds to navigate the situation or even to kickstart a new chapter in your life if you no longer plan to work.

It is harder for older Americans to start a new job search.

You Are Only Working Part-Time

If you claim Social Security before reaching your full retirement age and continue to work, your benefits may be reduced if your earnings exceed the income limits for the year.

In 2024, individuals who have not yet reached full retirement age will see a reduction of $1 in benefits for every $2 earned above $22,320. For those who will reach full retirement age in 2024, the reduction is $1 for every $3 earned over $59,520 until they reach full retirement age.

However, if you’re working part-time and your earnings are below these thresholds, starting Social Security at 62 could be a viable option to supplement your income.

No One Is Dependent on Your Benefits

When you pass away, a surviving spouse, minor, or disabled child might be eligible to receive Social Security payments based on your benefits. A surviving spouse could get between 71% and 100% of your benefits, depending on their age, while a disabled child might receive 75% of your benefits monthly even after your death.

If there are no dependents who would qualify for these benefits based on your record, retiring early could be a wise choice if no one else relies on this income. If you meet the other conditions and have reached the minimum age for Social Security retirement, you might consider claiming your benefits sooner to make the most of your retirement years.

You Have Completed Your 35 Highest-Earnings Years

Your Social Security benefits are calculated from the highest 35 years of your earnings. If you’re currently in your peak earning years, continuing to work could increase your future benefits by replacing lower-earning years with higher ones if you delay claiming them.

However, if you’re working part-time or have had to retire early and won’t be increasing your average earnings, you won’t have the opportunity to boost your benefits with higher earning years. Still, by claiming benefits before reaching full retirement age, you will receive a reduced amount.

You Do Not Have Pension

A pension provides steady source of income to retirees without the volatility of stock markets.

For someone who can no longer work and lacks substantial retirement savings, Social Security may be a crucial source of income. Even if you have an IRA or 401(k) investments, relying on Social Security can help preserve your savings by postponing withdrawals during a stock market downturn.

You Want to Maximize Family Benefits

For married couples, the decision of when to claim retirement benefits isn’t solely an individual one. The work history of your partner, or lack thereof, may offer strategic options to maximize household benefits, some of which may favor early claiming.

For instance, if your spouse’s retirement benefit is much lower than yours due to lower wages or time away from work for caregiving or health reasons, they might qualify for a spousal benefit based on your earnings record. Social Security would pay them between a third and half of your benefit amount, but only after you’ve claimed it.

One strategy could involve the higher-earning spouse delaying their claim until age 70 while the lower-earning spouse claims early to start receiving some Social Security income.

Alternatively, if you can no longer work and your partner doesn’t qualify for a retirement benefit of their own, claiming early could mean a lower payment for yourself but could also activate spousal benefits for your partner, providing additional income when you need it.

You Have Debts to Pay

If you have outstanding debt and can’t boost your income or withdraw from savings, you might want to take Social Security payments earlier. This is particularly true if you’re facing escalating interest charges. Before you do, consider consolidating your debt and finding ways to lower interest rates. It’s also essential to address the root cause of your debt and maintain a budget to avoid falling back into debt in the future.

If you do not already have a budget, consider signing up for free budget apps such as Personal Capital which automatically create a budget for you based on your existing spending patters. You can read my Personal Capital Review and how I use the free software.

You Can’t Work And Need Income

Many workers face physically demanding jobs, with over half enduring hazardous or unhealthy conditions. These circumstances may compel them to retire early and claim Social Security for financial support.

As per the March 2024 Congressional Budget office report, Social Security will be insolvent in 10 years unless changes are made to shore up the fund. If you are concerned about social security funds running out, or benefits being reduced, starting social security payments as soon as you are eligible might not be a bad idea.

You Prefer To Invest On Your Own

Waiting to claim social security does increase your benefits. However, the increased amount is made up of investment gains plus mortality credits. You get more money because someone else died. Rather than waiting for the increased benefits you might have better investment options yielding more.

It is hard to beat the 8% guaranteed returns for each year you wait to claim after FRA so consult with a licensed professional.

Claiming Social Security at age 62 instead of waiting until your full retirement age (FRA) results in a 30% reduction in monthly benefits. Conversely, for each year you postpone claiming Social Security beyond your FRA up to age 70, your benefit increases by 8%. Therefore, if you can afford to wait, it may be a more advantageous choice.

If you start claiming Social Security at age 62 with reduced benefits, your annual cost-of-living adjustment (COLA) will also be lower since it is based on your initial benefit amount.

The COLA can be particularly beneficial during periods of high inflation in retirement. By delaying your Social Security claim, you can secure a higher retirement income that is better protected from inflation.

Delaying your Social Security claim can lead to a larger benefit. Each year you wait beyond your full retirement age (FRA) to claim, your benefit increases by 8%. This can translate to a monthly benefit that’s at least 24% higher if you wait until age 70. However, consider your retirement savings, other income sources, and life expectancy when making this decision.

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The 10 States Taxing Social Security in 2024 and the 2 That Just Stopped

While many bask in the belief that their golden years will be tax-friendly, residents in ten specific states are facing a reality check as their Social Security benefits come under the taxman’s purview. Conversely, a wave of relief is set to wash over two states, marking an end to their era of taxing these benefits. This shift paints a complex portrait of retirement planning across the U.S., underscoring the importance of staying informed of the ever changing tax laws. Are you residing in one of these states? It’s time to uncover the impact of these tax changes on your retirement strategy and possibly reconsider your locale choice for those serene post-work years. Here are the states taxing social security benefits.

The States Taxing Social Security in 2024 and the 2 That Just Stopped

Retire Abroad and Still Collect Social Security? Avoid These 9 Countries Where It’s Not Possible

Dreaming of retiring to a sun-drenched beach or a quaint village? Many Americans envision spending their golden years abroad, savoring the delights of new cultures and landscapes. However, an essential part of this dream hinges on the financial stability provided by Social Security benefits. Before packing your bags and bidding farewell, it’s crucial to know that not all countries play by the same rules when it comes to collecting these benefits overseas. Here are the nine countries where your dream of retiring abroad could hit a snag, as Social Security benefits don’t cross every border. Avoid living in these countries so your retirement plans don’t get lost in translation.

Retire Abroad and Still Collect Social Security? Avoid These 9 Countries Where It’s Not Possible

Record High Number of 401(k) Millionaires Secure Retirement, While Most Americans Face Growing Uncertainty

Fidelity’s analysis of 24 million 401(k) accounts revealed that the number of 401(k) “millionaires” reached 544,000 last quarter, marking a 9.5 percent increase from 497,000 in the second quarter. The number of IRA millionaires increased by 5%, rising from 398,594 to 418,111. The average balance in that group was $1.616 million by the end of September, up from $1.595 million in the second quarter. Yet, this financial triumph contrasts sharply with the grim reality for the average American, whose retirement balances tells a very different story.

Record High Number of 401(k) Millionaires Secure Retirement, While Most Americans Face Growing Uncertainty

Retirees hoping for relief from rising costs with the 2025 Social Security cost-of-living adjustment (COLA) are facing a harsh reality: most of the 2.5% increase will be swallowed by higher Medicare premiums and deductibles. Next year’s COLA falls far short of the 8.7% adjustment for 2023, which was the largest increase in over 40 years and meant to help seniors and people with disabilities keep up with soaring prices. The official Social Security cost-of-living adjustment (COLA) numbers released on 10th October are a disappointing 2.5%, a sharp drop from the 3.2% increase retirees received in 2024. This meager adjustment raises concerns about how seniors will cope with persistent inflation

2025 Social Security COLA Almost Wiped Out by Medicare Hikes, Leaving Retirees Struggling

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