Question

What are the pros and cons of taking Social Security retirement benefits at age 62, at normal retirement age, and at age 70. Consider the cash flow and tax implications of each option.

Answer 1

At the age of 62

Taking Social Security at age 62 is somewhat a good idea, but for certain people, it is not a best financial decision. More benefits can be earned by waiting until your full retirement age, or even longer, before beginning your benefits. According to studies, half of Americans do file at 62. But for most people, it's a costly mistake.

cons:-

1. we will receive only smaller amount of money for the rest of your life, than if we would wait and we can expect up to a 30% reduction in monthly benefits.
2. we wont get Medicare benefits until you are 65, so an early retirement plan must take into account considerable health care costs.

pros:-

1. we can expect up to a 30% reduction in monthly benefits
2. if we delay claiming Social Security up to age 70, then we will get an 8% increase in the benefit.

Social Security benefits may or may not be taxed after 62, depending in large part on other income earned. Those only receiving Social Security benefits do not have to pay federal income taxes.

Normal retirement age ( age 66-70)

pros:-

• ability to create a financial reserve and also to enjoy job-free years.
• insurance benefits

For individual filers with combined income of $25,000 to $34,000, 50% of your Social Security benefit may be subject to federal income taxes. If your combined income exceeds $34,000, then up to 85% of your Social Security benefits could be taxed.

Age 70 and Older :-

pros:-

• more time to increase your savings.
• highest possible Social Security payout.
• having a well plags enable us to have money to do the things we truly love.

cons:-

• studies stated that majority of people are not saving their income for future benefits ie, lack of preparation.

after age of 70, Social Security benefits will not be reduced. However, Social Security benefits are taxable. If the combined income is more than $44,000, 85% of our benefits may be subject to income taxes.