Conventional wisdom has it that to get the most out of your Social Security, you should wait as long as possible to start your benefits. That’s good advice for some, but not for all. There are a variety of reasons why you might want to take your benefits at 62 (the earliest you can start your Social Security) or some other point before you reach your full retirement age. Today’s questions come from people like that.
Q: My wife and I are both approaching age 62. We are inundated with advice to wait until 70 to start our Social Security. But frankly, I don’t think I'll live that long. I’ve already had some serious heart problems. And both my parents and other close family members died in their 60s, so I didn’t inherit the best of genes. Thankfully, my wife doesn’t have those problems. Also, she had a good job and will get a Social Security benefit that is slightly more than mine. Can you think of any downsides if I take my Social Security at 62? How about my wife?
A: As I always point out to my readers, I am not a financial planner, so you might want to consult one. But from my perspective, I can’t think of any downsides to starting your benefits at 62.
In fact, I did the same thing—for some of the same reasons that you face. My dad died at age 47, and none of my many uncles made it to age 65. Fortunately, I beat the odds, as I’m now 73. But I still don’t regret starting my benefits at age 62. I’ve been getting monthly Social Security checks for 11 years now. Had I waited until 70, I‘d be getting a higher monthly benefit, but I’d only be in year three of getting Social Security. Had I waited until 70, it would have taken me a long time to make up for the benefits I would have received between 62 and 70. So again, I’m happy.
One normal downside to a guy getting reduced benefits before his full retirement age is that the reduction would carry over to any widow’s benefits his wife might be due after he dies. But in your case, that’s not an issue because you said your wife’s Social Security is already more than yours, meaning she wouldn’t be due any widow’s benefits no matter when you started your retirement checks.
Speaking of your wife, if she doesn’t have your health issues, she might want to consider waiting until her full retirement age to start her own benefits.
Q: I am about to turn 70 and plan to start my Social Security then. My wife is almost 62. She is going to get a much smaller Social Security benefit than I will because she was a homemaker for much of our marriage. We were thinking of having her file for her benefits at 62. But someone told us that if she takes reduced benefits on her own record, she will get a big reduction in her widow’s benefits someday (assuming I die before she does). Is this true?
A: No, it is not true. If she takes reduced retirement benefits on her own account, that reduction does not carry over to her widow’s benefit. Her widow’s benefit will be based on one thing only: her age when you die and when she starts her widow’s benefits. Assuming she is over her full retirement age when that happens, her own reduced retirement benefit will be supplemented up to 100 percent of what you were getting at the time of death.
And FYI: Assuming her own benefit is much smaller than yours, that benefit will be supplemented with some spousal benefits on your record. That supplement will be based on your full retirement age benefit, not your augmented age 70 rate. And just like her retirement benefit will be reduced, so too will her spousal benefits. But after you die, it’s a different story. Her widow’s rate will be based on your age 70 benefit, not your FRA benefit. And again, assuming she is over her own FRA when you die, there will be no reduction in that widow’s benefit.
Q: In a recent column, you gave an example of a guy who was 67 on April 7. And that’s when he wanted his benefits to start. You said that the first check he would be due is the April check, which would be paid in May. Well, I just signed up for my Social Security to start at age 62. I am 62 on June 12. But a letter I got from Social Security said my first check would be the July check, payable in August. What’s going on?
A: There is one little glitch to starting benefits at age 62. There is a law that you must be 62 for an entire calendar month before you can get your first Social Security check. July is the first month you are 62 for the whole month, so that’s the first check you are due, payable in August.
Q: I am 53 and my wife is 50. We have had a very successful business and have made enough lucrative investments so that we have been able to sell the business and retire. But now we are a bit concerned about our future Social Security benefits. We could start another business, and pay ourselves a salary, just so that we continue to pay into Social Security until our mid-60s. But we are not sure if we will be compensated enough in potential Social Security benefits to offset all the Social Security taxes we will pay. Can you help?
A: You really need to talk to a financial planner about this—not me. And frankly, I’m surprised you are even thinking about Social Security. If you could afford to retire comfortably in your early 50s, it seems to me that future Social Security benefits wouldn’t be much of a concern for you. But since you brought it up, I'll give you some food for thought.
Your Social Security benefit will be based on your highest 35 years of earnings. If you remain retired, you will be missing out on about 15 years of what would normally be some of your highest years of income. And this will have an obvious adverse effect on your future Social Security benefits.
To find out how much of an effect, you should use the retirement calculators at the Social Security Administration website, SocialSecurity.gov. Just click on the “Plan for retirement” link on the homepage and follow the instructions. You can use their retirement estimators and plug in various future earnings scenarios to come up with different estimates of your eventual retirement benefits.
