Americans nearing retirement know the advice all too well: When it comes to Social Security, good things come to those who wait. And those who can’t wait? Their benefits get slashed.
Those reduced benefits can add up. If you take Social Security before full retirement age, you should expect a 30% reduction in monthly benefits, according to Fidelity.
Yet a 2021 Gallup poll cited by Experian indicates many take the exit ramp sooner. It found the average retirement age was 62. Experian theorizes that may be related to the fact that 62 is the youngest age you can claim your government benefits.
But even knowing they could see a 30% reduction in their monthly checks, these retirees aren’t necessarily making a grave error. There are some solid reasons to start taking your Social Security benefits as soon as you can.
Health concerns rank high on the list of concerns cited by those in the Gallup poll. Respondents were particularly concerned they could face being disabled, needing unexpected surgery, or being given a serious diagnosis.
While it’s possible you could enjoy an early retirement and your health remains robust, keep in mind that Medicare benefits don’t kick in until you reach 65.
The thing with unexpected health emergencies is that they’re unexpected. And they can get expensive. Having a regular stream of income can mean the difference between being able to manage anything that pops up and having to go into debt to cover medical bills.https://moneywise.com/insurance/health/american-medical-debt-hits-140-billion-nearly-double-previous-estimates).
Debt doesn’t discriminate based on age. Americans racked up $18.6 trillion in debt during the first few months of 2022, according to the Federal Reserve. Of that, those between 55 and 64 had an average debt load of $97,290.
Especially when that debt is unsecured, as in credit cards with high interest, it’s a budget killer. Why continue, then, to rack up runaway interest charges if you have government cash available?
Ideally, you’d pay off all debts before you decide to retire, but if Social Security can help wipe out stubborn credit card balances, that’s a good solution too. You can claim checks of different amounts now and claim lower benefits later.
And if you’re still worried about cash flow is too tight, you can continue working and still receive benefits — but only if you’ve reached full retirement age, around 66 or 67.
Your partner earns enough for you both
If your spouse claims full Social Security benefits at retirement age, you can then claim 50% of their benefits.
First, take a good hard look at what you earn. If 50% of your spousal income is more than 100% of your income, you might as well go ahead and just retire to live out those Golden Years’ dreams.
Bottom line: Easing does it
Americans who wait until they reach the full retirement age likely enjoy the best Social Security scenario. But if you’re ready to pull back professionally, a good compromise might be easing into retirement to enjoy the good health you have, even as you manage debts within your means.
So is 62 the magic number?
Maybe, if you fit the bill as we’ve described above.
Regardless, before making any major decisions, a financial advisor can help you determine what’s best for you. Remember: They’ve got their own retirement to think about, so you can benefit from their experience in more ways than one.