Claiming Social Security benefits as early as 62 might reduce your total lifetime benefits by up to 30% due to smaller monthly payouts. Delaying benefits until full retirement age, or even later, could increase these benefits, possibly up to 32%, thanks to larger monthly sums. Still, ensure to factor in your current financial situation, health status and family longevity history before deciding.
Options to reverse early claims do exist, but they come with their unique limitations and complexities. Alternatively, if within the first year of claiming, you can choose to cancel your claim and return any benefits received. This allows you to defer and claim larger benefits at a later stage. However, this might not be feasible for individuals unable to return the received benefits.
Beyond the first year, full retirement age claimants can suspend their benefits until they wish to restart them or when they reach 70, the maximum age for Social Security benefits.
Assessing early Social Security claim impacts
This period of suspension can see the benefits grow by roughly two-thirds of 1% monthly, or 8% annually.
To illustrate, if an eligible claimant for $2,000 monthly payment decides to claim at 62, their benefits reduce to $1,400. But, if they suspend benefits at 67 for three years, their monthly benefit could rise to $1,736 at 70, resulting in an extra $336 per check and enhancing their lifetime benefit. However, plan strategically considering factors such as inflation and cost of living adjustments, as they increase every year.
Applying these strategies depends largely on your ability to finance your expenses during the benefit suspension period without Social Security. While feasible for those with significant savings or steady income, it may not be practical for all. Hence, carefully consider your current and future financial situation before making such a significant decision. Financial advisors also suggest having a cash reserve built up prior to invoking the suspension of such benefits. By doing so, beneficiaries can better brace potential financial hardship during the suspension period, safeguarding their long-term financial health.
