The Social Security Administration is pretty flexible when it comes to letting seniors sign up for benefits. You can file for Social Security as early as age 62, or delay your filing until age 70. In fact, you technically don’t have to claim benefits once you turn 70, but there’s no financial incentive to postpone your filing any longer.
Now since this is the case, you may be thinking, “What’s the downside of filing at 62?”
But actually, there’s a big one. If you sign up for benefits before full retirement age (FRA), which is either 66, 67, or 66 and a specific number of months, depending on the year you were born, you’ll reduce them on a permanent basis. Filing for benefits at age 64, for example, will shrink your benefits by 20% if your FRA is 67. Meanwhile, filing at 62 will result in the greatest reduction possible in that scenario — a cut of 30%.
Age 62 is the most popular age for seniors to sign up for Social Security, so clearly, a lot of people are willing to forgo a higher benefit to get their money sooner. But if that’s the direction you’re leaning in, here’s why you may want to reconsider.
Retirement could cost more than you think
Many people are quick to assume that their living costs will drop dramatically once they stop working. But when you step back and think about it, that’s unlikely to happen.
Sure, you might save money by not having to commute, and also, you won’t have to make contributions to a retirement savings plan since, well, you’re already in retirement. But other than that, many of the bills that you face later on in your career are apt to stay in place during retirement. And some may even go up.
Take healthcare, for example. It’s easy to assume that your costs will drop once you enroll in Medicare, but actually, Fidelity just released its latest estimate on senior healthcare costs, and it found that the average 65-year-old male-female couple today will spend a whopping $300,000 on medical care throughout retirement. For singles, the average male retiree is looking at $143,000, while the typical female is looking at $157,000…Read more>>