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Are you planning to start collecting your Social Security retirement benefits at 62?
Perhaps you're tired of your job and want to retire. Or maybe you're in less-than-ideal health or having a hard time making ends meet and want to start collecting benefits while you continue working.
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There are plenty of reasons why it may make sense to claim your benefit early. But claiming early also has its downsides, which you'll need to weigh carefully.
From a lower monthly benefit to a gap in healthcare coverage, here are a few consequences of taking your Social Security retirement benefit early.
1. Your monthly benefit will be lower for the rest of your life
To receive 100% of the monthly Social Security benefit you're entitled to, you'll have to wait until you reach full retirement age (FRA) as defined by the Social Security Administration (SSA). Your FRA is based on your birth date, so those currently eligible to collect at age 62 — or those who will be in the future — have an FRA of 67.
If you take your benefits before your FRA, your benefit amount will be permanently reduced each month before age 67, up to a maximum of 30% at age 62. That means if you're entitled to a monthly benefit of $1,000 at 67, your monthly benefit will only be $700 at 62.
Accepting reduced benefits is a big decision — especially since the Social Security retirement trust fund is projected to run out by 2032, which itself could result in a 22% cut in retirement benefits (1) across the board.
So you'll want to stay well informed on the latest policies and work through their financial implications so you can identify what makes most sense for you. If you do decide to take lower payments, you may need to tighten your budget as well.
To help you tackle both the goal of staying informed and ways to make most of a tight budget, you might want to consider joining a senior-focused organization like AARP.
As a trusted resource for older Americans, AARP can help you make informed financial and health decisions. It also offers discounts on everything from prescriptions and dental plans to travel, entertainment and insurance.
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