Dear Rusty: My husband took an early retirement at age 62, and I will be turning 62 next year. I am having some health issues and I’m thinking about taking an early retirement. Is this a good idea? Signed: Uncertain what to do
Dear Uncertain: That’s a difficult question to answer with so little information, but I’ll try to give you some pointers which may help you decide. In choosing when to start your Social Security benefits you should always look at several things, including how badly you need the money now, your current health and how long you expect to live. If you take your Social Security benefits when you are 62, the monthly amount you receive will be 27.5% lower than you would get at your full retirement age of 66 1/2. But if your current health issues mean that you must stop working and lose income you rely upon to make ends meet, then taking your benefits at age 62 will give you some badly needed financial relief. The fact is that Social Security was designed to pay about the same total amount of money whether you claim early or wait until your full retirement age. However, whether you actually get the same total amount in either case depends upon you living long enough to break even. Most analyses I’ve done reveal that if you wait and take your benefits at age 66 you’ll need to live until you are about 78 to collect the same amount of money you would have gotten if you claimed at age 62. If you live longer than your break-even age, you’ll have collected more in cumulative benefits by waiting until your full retirement age to apply. Another thing I suggest you consider is that by applying for Social Security benefits at age 62, you will be automatically deemed to be filing for both your own benefit and any spousal benefit you may be due from your husband’s record. A lower earning spouse is entitled to a “spousal boost” from the other spouse’s record, but only if that spousal benefit will be higher than they are entitled to on their own work record. At full retirement age (FRA) a lower earning spouse can get 50% of the higher earning spouse’s “primary insurance amount” (or “PIA”, what the 2nd spouse was entitled to at their FRA). But you only get that 50% if you have reached your full retirement age; if you take it earlier than that, for example at age 62, the spousal benefit will be cut to as little as 32.5% of the higher earning spouse’s FRA benefit amount. So, is it a good idea to take your Social Security benefits at age 62? Again, it depends upon your health, financial status and your expected longevity. If you apply early, your payments are smaller, but you get more of them; if you wait to apply your payments are larger but you get fewer of them. Unless, of course, you live to a ripe old age, in which case the larger monthly payment you get by waiting will undoubtedly come in handy when you’re older and your total cumulative benefits will be more. But all of that doesn’t matter if your current health and financial status mean you need the money now. It’s a choice only you can make.
And here are a couple of final thoughts: If you continue working while collecting early benefits you’ll be subject to Social Security’s annual earnings limit ($17,040 for 2018). But if your current health issues are severe enough that you can’t continue working, you may want to consider applying for Social Security Disability Insurance (SSDI) benefits. If approved, SSDI benefits would be based upon your FRA benefit amount, resulting in a higher benefit at an earlier age. And you can file for both early retirement benefits and SSDI at the same time, which would allow you to collect benefits earlier while your SSDI application is being considered.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at [email protected].