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Why Smart People Take Social Security at 62

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Lee2:
I am not so sure that is the best for those of you who have family who lived into their 80's and beyond but for myself I took it at 62 and now at almost 70, I wonder if I was correct in doing so. For those of you coming up on 62 etc, hope this article gives you something to think about, not to mention that you might live longer without the stress of working, I am pretty sure that I might not be here had I continued to work, what are your thoughts?

https://finance.yahoo.com/news/why-smart-people-social-security-141800065.html

When should you claim Social Security benefits? That's tough to answer, especially since 91% of older adults don't understand the factors that determine how much their Social Security benefits will be. 

You can claim Social Security benefits any time starting at age 62, but your standard benefit amount is based on retiring at full retirement age (FRA) -- which is 67 if you were born after 1960. For each month before FRA that you claim benefits, benefits will be reduced, while benefits will increase for each month you delay after FRA, up until age 70.

Because Social Security provides guaranteed income for life, many financial experts advise you wait as long as possible to claim your benefits. But there's also an argument to be made that smart people claim benefits at 62 instead of putting off their claim. Here are four reasons why it makes sense to claim Social Security as soon as possible.

1. Claiming early makes early retirement possible
Claiming Social Security when you're 62 could make early retirement affordable when it wouldn't otherwise be.

If you're miserable at work -- or can't work anymore due to health issues or an inability to find a  job -- claiming Social Security so you can leave the workforce could save your sanity or your life.

Even if you don't hate your job, studies have shown a link between early retirement and improved health outcomes.

One Dutch study found men who had taken early retirement were around 2.6% less likely to die during the next five years compared with men who stayed in the workforce, while other research found extra years of retirement reduced the risk of serious conditions, such as heart disease, by as much as 20%. That research noted the "retirement effect on health is beneficial and significant."

Smart people who want to reap these benefits of early retirement will claim Social Security at 62, if that's what it takes to make leaving the workforce possible.

2. Claiming early makes retirement more enjoyable
Early retirement tends to be the most enjoyable part of retirement for most seniors because they're still young and healthy enough to do activities they enjoy. Because these activities -- like travel -- require money, smart people claim benefits at 62 so they'll be able to do the activities they want while they still can.

More than one-third of current retirees responding to a Nationwide retirement survey said health problems were stopping them from having the retirement they had hoped for. Among recent retirees responding to that same survey, 80% indicated their health issues occurred earlier than planned.

While a small number of retirees -- around 23% -- said they wished they had waited to claim Social Security so they would have more money to handle health issues, claiming benefits before you're sick means you'll have more cash to enjoy life while you still can.

Ideally, you should make a plan to cover healthcare later in your retirement years -- such as investing in a health savings account -- and use your Social Security income starting at 62 to indulge your passions before it's too late.

3. If you wait, you may not live long enough to break even
One of the best arguments for delaying Social Security benefits is that you'll have a larger guaranteed income for the rest of your life once you eventually begin claiming benefits. The problem is, you'll also have a number of years when you get $0 in benefits that you'd have otherwise received.

You need to account for these missed benefits when you factor in whether you should delay claiming. There's some simple math you can do to find out how long it will take you to break even if you delay benefits. You can also refer to this chart, which shows the number of years it would take to make up for missed benefits with extra income you get by delaying your claim. 

If your benefit at a full retirement age of 67 would be $1,404, claiming at 62 would reduce your benefit to $983 -- but you'd get five extra years of benefits. It would take you 11.7 years of receiving a higher benefit starting at 67 to make up for those years of missed benefits. You'd be 78.7 before you broke even. The only problem is, a 2017 report from the National Center for Health Statistics estimated average life expectancy for Americans in 2016 at 78.6.

Sure, you might live longer -- but you might not. And if you don't live long enough to break even, you've given up extra income that could have made the life you did have left more enjoyable.

4. Rising costs of living mean future benefits buy less
A dollar today is worth more than a dollar tomorrow, thanks to inflation. This is true of Social Security benefits, too. While benefits are supposed to keep pace with rising costs due to an annual cost-of-living adjustment, the metric used to measure annual Social Security raises doesn't accurately reflect actual rising costs in the spending categories where seniors put most of their money.

Social Security cost-of-living increases are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), but urban wage earners and clerical workers don't spend as much of their income on housing and medication as most seniors do.

Unfortunately, both healthcare and housing costs are rising faster than Social Security cost-of-living adjustments. 

This means that the Social Security benefits you'll get when you're 67 or 70 won't buy as much as the Social Security benefits you'd get five or eight years earlier at age 62.  Claiming benefits as early as possible, before rising costs further erode the actual value of Social Security, just makes sense.

What's the best choice for you?
While all of these arguments are powerful ones for claiming benefits at 62, there are some caveats. First, if you work before full retirement age, your Social Security benefits could be reduced. You'll get credit for this reduction later, but there's no sense in claiming benefits early if you'll immediately lose them anyway because you're still working and earning too much income.

Retiring and claiming benefits early can also pose risks, including the potential that you'll have too little money to live on later in retirement if you don't have enough savings. You can't live on Social Security alone -- especially if you've claimed at 62 and taken a reduced benefit -- and you don't want to retire until you're sure you have the money you need to sustain you.

But if you have enough to live on and you've decided you want to leave the workforce, claiming benefits at 62 is likely a smart move so you can start reaping the rewards of all those years of Social Security taxes you paid.

BudM:
From what I am seeing, anyone who is investing in health care with an HSA, has to give up contributions to it when signing up for Medicare.  I am trying to check in to it more as far as what if since you can not use Medicare overseas?  I am now less than away from 65 but, debating if am going to sign up for it.  I am keeping my former employer group insurance as I am overseas and I am only a vet, not one of those military retiree guys so I don't have that stuff nor VA health care.  Am planning for another 30 years at least prior to kicking out but apparently, as I am seeing now, my HSA will be flushed once I clear out the funds that will be left in it.  I still don't regret retiring early though and drawing SS at 62.  I thought it out and did it for my sanity.  In fact, I was only 59 for one month when I pulled the plug on those yokels.  I gave them notice though that they only had a few months left to abuse me any longer.

Lee2:
Medicare is automatic when you turn 65, part B and so on is by choice, those are the ones we have to pay for. In my case my govt insurance made me take part B, a friend who retired from the post office did not have to take it, so I suggest you check with whoever provides your insurance before refusing to take part B or beyond.

FastWalk:
It is a good topic for the Philippines,  due to the possible lower cost of living it allows more choices.  For my wife and I if we need some more money when I turn 62 we will take the SS then.  If not will wait because wife is younger than I and the survivor benefit I believe is limited based on what I receive.  The extra amount over her likely life span should easily be more if I waited till 70.  But if things go poorly we could take it early.

BudM:
I already had checked on my govt health insurance.  I don't have to take B or beyond.  And if something happened that I by chance had to go back to the US or move to a territory for extended period for whatever reason, I don't have to pay the penalty to start B up.  And according to what I have read elsewhere, which I will find out before it happens, people not drawing SS at that time, have to sign up for Medicare. But, if you are already drawing SS prior to 65, then both are automatic and they take the B payments from you.  I am stopping that before it happens.  And according to something else I read, which I don't know if I will confirm or not, you are allowed to refuse A.  Why, if it is no cost for most?  Well, maybe because of certain reasons similar to mine but I can not fathom throwing that out the window and not have it there for an emergency situation.  As a reminder, I said that I had read that but I do not know if that is fact.  Or if I even need to know.

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