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Think Wisely Before Applying For Retirement As Retiring Early Can Reduce Your Social Security Benefits

Social Security Benefits
Social Security Benefits; Source- MARCA

There is a cost associated with retiring early, which is the main drawback. Specifically, your retirement benefits from Social Security will be significantly less than if you postponed retirement.

Social Security Benefits

Social Security Benefits; Source- CNET

Social Security Benefits Before FRA

Receiving benefits before reaching full retirement age is penalized by Social Security. For every month you retire early, up to a maximum of 36 months, your payout will be lowered by five-ninths of 1%. An additional five-twelfths of one percent penalty will be imposed if retirement benefits are collected before then. 67 is the full retirement age. For anyone thinking about retiring at age 62, that makes sense because the FRA for anyone born in 1960 or later is 67. Your Social Security retirement payment will be lowered by 30% if you begin collecting benefits exactly at age 62.

The Amount Of Social Security Benefits

The typical monthly pension for retired employees was $1,840 in August 2023. This benefit would be reduced by 30%, or $552 per every month, or $6,624 annually. For those collecting benefits at full retirement age in 2023, the highest possible Social Security benefit is $3,627. This benefit would be reduced by 30%, or around $1,088 each month or $13,057 annually. You can open a Social Security account and utilize the online benefits calculator to receive a more accurate estimate of what it might cost you to start receiving retirement benefits from Social Security at age 62 rather than age 67.

Social Security Benefits At Age 62

One expense associated with retiring at age 62 is the thirty percent Social Security benefits penalty. There are a few more things to think about as well. First, the 35 years with the highest earnings are used in the Social Security benefit calculation. A lot of people make the most money in their later years of employment. Your primary insurance amount the sum you would be entitled to if you waited until you reached full retirement age may be decreased if you begin receiving retirement benefits from Social Security at age 62. Your Social Security benefit at age 62 will be reduced as a result.

The precise financial impact that this may have will differ greatly from person to person. In your case, maybe it would not be a significant sum. But it’s certainly something to consider. Health insurance is the second most important thing to think about. Medicare will be available to you if you wait until you are 65 to start receiving Social Security retirement benefits. However, you will require alternate medical coverage for three years if you retire at the age of 62.

Some employees may be eligible for retirement health insurance via their workplace. For many Americans, though, that is not the case. If you retire at age 62, you may have to pay a great deal for health insurance because Medicare is usually less expensive than commercial health insurance. For the majority of Americans, delaying starting Social Security benefits until you reach full retirement age is the best financial decision. You will receive considerably more each month if you wait until you are 70 years old. According to the SSA Administration, meanwhile, almost 25% of women and roughly 23% of men begin receiving payments from Social Security at age 62. If you want to be included in this category, know what your early retirement will cost you.

 

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