24 Mar 2022 Economic Trends

The Pros and Cons of Claiming Your Social Security Benefits Early

If you are depending on Social Security payments in retirement, then it is important to know the best timing to start taking distributions. What is the ideal timeline to start receiving these payments?

The Pros and Cons of Claiming Your Social Security Benefits Early

The Social Security Administration allows you to start payments as early as 62 years old. But, the “full retirement age” is at 67. If you accept Social Security payments before the age of 67, then it means that you are receiving early withdrawals. Consider these pros and cons to decide if it is a good idea for you to receive early Social Security benefits:

Pro: Immediate Money in Your Pocket

The obvious reason people take early Social Security withdrawals is because they need immediate money. Some people are worried about the fund being depleted in the future. Others might be in a tight financial situation and need payments right now. Taking the funds right now means that you access the money without delay.

Con: Smaller Payments

Accepting early Social Security payments means that you are locking in a lower monthly payment for the remainder of your life. For example, Social Security payments increase by approximately 8% per year. If your monthly payment is $2000 at the age of 62, waiting for five years can increase your payment to $2,758.

Pro: Enjoy Retirement in Good Health

There is a higher chance that you will enjoy better health in early retirement. This factor might be a motivation to take early Social Security withdrawals so you can use the money to pay for your dream retirement activities (such as traveling). Waiting until you are 70 means that you might be dealing with more health issues that could hinder your activities. Some people prefer to enjoy these benefits while they are younger.

Con: Minimize Lifetime Income

If you live a long life, then it means that you will be losing out on overall income. Even though you are receiving more payments overall, the lower monthly payments work out to be a smaller amount compared to the amount that adds up from higher payments. Initiating early payments means that you could potentially be receiving tens of thousands of dollars less over the remainder of your retirement.

Comprehensive Financial Planning

Social Security benefits are just one of the pieces that contributes to your retirement plan. In addition to timing your Social Security withdrawals, you also need to consider other financial strategies to build wealth to support your future retirement lifestyle.

Bulman Wealth Group is here to help with personalized, comprehensive financial planning. For more information, we invite you to schedule a consultation with one of our experienced team members.

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