I recently came across this article in the “Motley Fool” that caught my eye. The article, “Why Don’t More People Wait to Claim Social Security at 66?“ seemed to have a simple answer, but it did provide some excellent insights and information into the percentages that claim early, so I was glad I read it.
The 1st unique part of the article was the number of people who actually file early. At this time, even though the “normal” retirement age is 66 almost 1/2 of people file for reduced Social Security benefits at age 62.
The reason people are willing to take a 24% hit on their Social Security earnings (that’s the penalty off of your benefits for filing early)…
keep in mind why the Social Security Administration cuts benefits for early claimers. It’s not to punish them; it’s because people who start collecting benefits early will receive benefits for a longer amount of time.
The article explains it succinctly here…
the average 62-year-old retiree can be expected to live for about 21.4 more years, while the average 66-year-old will live for 18.3 more years. In other words, the 62-year-old is expected to receive Social Security checks for more than three years longer than someone who waits until 66 to claim benefits.
There are also a few other reasons why people take Social Security early…
They need the money. How many Americans are on track for retirement? Very few…
It’s no secret that millions of Americans are underprepared for retirement. In fact, according to the Economic Policy Institute (EPI), almost half of American families have no retirement savings account at all, including almost 40% of those between the ages of 56 and 61.
The average balance of retirement savings within that 56-61 age group is $163,577, which may sound like a lot, but considering that with the oft-used “4% rule” of retirement, this translates to just over $6,500 in sustainable income from savings. Even more scary, the median amount of retirement savings in this age group is just $17,000.
And even if you are on track for retirement, it COULD still be a good idea to take Social Security early an use it as a means of paying for long-term care insurance, where premiums can be in the hundreds of perhaps thousands of dollars a month.
Should I Take It Early or Wait?
While the statistics may seem surprising at first glance, claiming Social Security before full retirement age is a smart financial decision for millions of Americans. On the other hand, there are some valid reasons for waiting, such as being in good health or a history of longevity in your family, or the fact that you’re still working and don’t need the income.
The point is that if you’re trying to figure out the best age for you to claim Social Security, it’s important to consider the points discussed here as well as the overall picture of your life situation and goals.