Risks of Taking Social Security at Specific Ages by Kara Jones
According to Kara Jones, When should you start taking Social Security benefits? This is a question that has received a lot of attention (and caused a lot of confusion over the years!). Get ten experts in a room, and they would probably remain in there until the end of time without agreeing. What we do know is that there is a wrong time to start taking Social Security benefits.
Let’s not forget, the size of your monthly checks will depend somewhat on when you claim Social Security. If you’re sitting in a world of confusion right now, allow us to lift some of the fog and explain why certain ages are considered the ‘wrong time’ to start claiming.
Claiming Early
Kara Jones said, as soon as the federal government decided that people didn’t need to wait until full retirement age to start claiming Social Security, they needed to eliminate any unfair advantage that came from the additional payments. As a result, a formula was devised by the Social Security Administration, and those who claimed early had their checks reduced. With this new formula, the idea is that everybody receives roughly the same amount from the program, but some people split this money over a more extended period of time.
When the formula was first introduced, 65 was the full retirement age and, for every month early, and the SSA took 0.55% off benefits. For anybody claiming three years early at 62, monthly payments tended to reach 80% of what they would have been if they had waited. At this stage, everybody was happy enough because it was a universal rule. After a quick calculation, it was easy to see how much one would receive after retiring at a certain age.
However, everything soon changed. The retirement age increased to 67, and the formula for early claims was adjusted. After the first three years, benefits are now cut by around 0.42% (compared to 0.55% in the first three years) described by Kara Jones.
Discouraging Claims at 63/64
Suddenly, making Social Security claims between 63 and 64 made no fiscal sense. With the new system, it’s important to consider your options thoroughly and how the situation changes from one year to the next. If your full retirement age is 67, there’s likely to be a huge difference in what you receive from 62 to 63 and then to 64.
Our Advice: Be Willing to Wait
From Kara Jones’s experience, there’s actually a good understanding of Social Security claiming among federal workers. For the most part, we know that there’s a trade-off to claiming early. If you look at the statistics, you’ll see a good number of people claiming at 62 and then a dip for those at 63 and 64. While some wait until 65, others wait until they reach the full retirement age. After speaking with many federal workers, there’s a general consensus that the appropriate age for retirement is 65 regardless of the changes made in recent years.
In the time ahead, we’re sure there will be lots of views and opinions on the right time to claim Social Security – and we may even contribute to this debate. However, one thing is for sure, judging the worst time to claim is much easier. If you can avoid claiming at 63 and 64, we highly recommend doing it. As for when you should claim, it all comes down to personal circumstances and your own financial background.
