Ever wonder why people claim Social Security at age 62? Many people do, even though they should wait until age 70. Is it fear, greed, poor planning, or lack of knowledge? People make many mistakes, and I will touch on six other mistakes people often make. Welcome back to Powering Your Retirement Radio. I am your host Dan Leonard, and I am a PG&E Retirement Specialist. I have made it to Episode 10, which means I have now published more episodes than half of all podcasts.
Six Common Mistakes People Make
1. Worrying about dying too young – Longevity Insurance
2. Waiting too long to claim -Disability Benefits
3. Not working because of the earnings limit – Losing money from working
4. Not filing for widow’s or widower’s benefits – Collect at age 60
5. Getting divorced – Married for 10 years, you are eligible
6. Hitting tax torpedoes – RMD’s & IRMAA charges
Collecting at age 62 or waiting until age 70
There are two paths people follow. One is to collect as soon as possible because you think Social Security will disappear. Two is to collect the biggest pile of money over your lifetime.
Collect ASAP – Age 62
Collecting at age 62 usually means you are collecting because you can’t work anymore due to health issues, or you lost your job and couldn’t replace it, and you need the income. The other option is to collect Social Security at 62. Finally, you can reach the number you need to retire at 62. The first path is more common than you might think. The second option is not uncommon if you have done an excellent job with your 401k and you have a pension.
The biggest pile of money
The biggest pile of money is available to all. The key is planning. If you wait until age 70 to collect your benefits, you will receive between 70 to 75% more at age 70 than you would have received at age 62. You will also have missed 8 years of payments. Many calculators can calculate the cross-over point where waiting makes more sense. Depending on the marital status, that point is usually between 77 and 83. That is not a big stretch to break even in today’s world.
What are you to do?
There is no one correct answer. In the claiming at 62 examples, if you can reclaim your life, replace your income and retire, it is hard to convince someone they need to keep working. On the other hand, if you can afford to go without Social Security and still retire at age 70, you will get the most money possible. It is hard to argue that maximizing the one source of lifetime income will continue to grow over time.
This decision is why it makes sense to talk with your advisor and determine what works best for you. In some cases, you may regret going without the money when you finally get it but don’t have the desire to spend it. You may also regret taking Social Security at 62, and you are in your late 80s, and your income is feeling the effects of inflation.
Regarding Social Security, consider it longevity insurance, and planning for the worst-case scenario is not bad.