One of the most current debates in the world of retirement is when to take Social Security. Yes, people are thinking about retirement all of the time, but you need money in order to stop working. Social Security is considered a way to supplement your monthly income, not to replace it completely. Still, it’s a lot easier to think about other options once you can really get that Social Security check in hand.
So that makes it a no-brainer, right? Go for the Social Security check as soon as you turn 62, right? Not so fast — you might need to start thinking about actually going with something a little different. You don’t want to just go with just anything — you need to make sure that you look at your options here.
While it’s true that you can retire at 62 and collect Social Security, you’re going to be paying a heavy price for it. If you file for Social Security as soon as you are eligible, you will end up having a smaller benefit than what you would get if you waited to retire at 66. However, since people are living a lot longer, you could really outlive your money and put yourself in a position where it would be really hard to keep your life together. It’s better to make sure that you focus on the bigger picture here — making sure that your retirement doesn’t outlive you. You really don’t want to find that you can’t take care of yourself as you get older. It’s a lot harder to enter the job market again, among other problems.
That’s not the only problem — you absorb a permanent 25% cut in benefits. That means that you really need to ensure that you can make up the difference with something else. Many of today’s retirees are forming businesses or other sources of revenue that are ongoing, whether or not they actually work at these ventures. This allows for a more luxurious life, but there are perils here too. There’s really no guarantee that your business is really going to be chugging along 5, 10, or even 15 years from now. So if you’re going to lean on business income, you really need to make sure that you have expectations that are backed by reality.
If you wait till age 66 to take Social Security, you get an 8% annual increase in benefits until age 70. That’s a percentage of money that can help you beat and overcome inflation. That’s definitely a good thing.
Taxes can also affect you when it comes to Social Security. If all of your money comes from Social Security, then it’s a good chance that you’re not going to have to pay too much in taxes on the money — benefits usually aren’t taxable at all. However, most people are saving for retirement with other methods, and those sources of income are going to be taxable. This means that you could owe a lot of money without thinking about.
The taxes in this category were originally targeted towards wealthy seniors so that they would pay their fair share. However, the income thresholds weren’t indexed to inflation. This means that you can get hit with a lot of tax.
Some people are deciding to file for benefits early because they think that Social Security is going to be reduced or even disappear completely. So they want to receive smaller pensions, which they feel are better than no money at all.
Many workers really don’t have the option to wait, which also makes the situation troubling. Indeed, if one is in poor health or has been pushed into early retirement, there’s no way to wait till 66 to file for benefits. You have to file and let things happen as they will happen.
That’s all the more reason why it’s good to make the right decisions in the present rather than trying to make better decisions later. You need to ensure that you are saving money now so that you won’t have to worry so much about retirement later.
No matter what decision you make, there are some strong reasons to delay retirement as long as you can. If you can’t, then you have to take things one day at a time and just do your best!