We make decisions all the time (every day) that end up affecting our retirements. This includes small things like how we spend our money everyday and big things like what choices we make in our career.
But there are some choices that affect our retirements more than hundreds of other choices combined. Two of the biggest choices that you can make is when you choose to retire and when to start Social Security. If you get these two choices right, odds are you are set up for a great retirement.
Today I am going to touch on Social Security and my thoughts on starting it early. But before I get too far, I want to be clear that there are very specific times when it makes a ton of sense to start Social Security early. Social Security is not a one-size-fits-all thing. I will discuss all of those reasons in a future article.
That being said, here three dumb reasons (that I hear all the time) to start Social Security at 62.
Reason #1: Delaying Social Security is a Government Ploy
Some people are thoroughly convinced that every day that they wait to file after their 62nd birthday they are simply playing into the government’s conspiracy to pay out as few benefits as possible.
For those that are familiar with the history of Social Security, you will know that this simply isn’t the case. The program was first signed into law in 1935 but it wasn’t until 1961 that the law was changed to allow both men and women to file early at age 62. And when this change was made, it was very clear that this adjustment was to assist older Americans who struggled to find work in their early sixties.
Reason #2: I Am Going To Die Early
Now, this argument has a few sides to it and some of which are valid reasons to draw early. For example, if you are single and you already have an illness that will most likely shorten your life expectancy then it probably makes sense to draw early.
That being said, many people use this argument before they have an illness or before they consider the ramifications on their spouse and family.
During the last century, life expectancies have grown dramatically. It is of my opinion that this will only continue. Right now, the average 65 year old male will live until 84 and the average 65 year old female will live to age 86.
Now, for those that are married and believe that they should draw early, please consider the next point. Survivors benefits, or the benefits that your spouse will be left with once you pass, is directly proportional to your benefit. This means that the longer you wait to file while you are alive, the higher the chances that your spouse will be taken care of when you pass.
So ironically, if you do believe that you will die early, one of the best ways to take care of your spouse is by delaying benefits, not taking them early.
Reason #3: Social Security is Going Broke
This reason does have some truth to it. This is what Social Security has on their website:
So in a nutshell, as of 2035, Social Security will only have enough funds to cover 75% of benefits due if nothing changes. This is far from the collapse of the program.
In my opinion, odds are very high that payroll taxes will be increased to cover the shortfall but again, that is only my opinion.
But let’s go through an example of what would happen if nothing changed in the Social Security law.
For example, let’s say at age 67 your full benefit is $2,000. That means that your benefit at age 62 would be $1,400.
If we assume that nothing changes and only 75% of benefits are going to be paid out, would you rather have 75% of your age 62 amount ($1,050) or 75% of your age 67 amount ($1,500)?
Conclusion
Again I want to repeat, I am not opposed to drawing benefits early when it makes sense. The most important thing is that we make this important decision based on facts. Not on fear or misinformation.
Social Security is a big part of retirement for most FERS federal employees and it is up to all of us to be informed about what makes sense for us.
