Due to concerns about the program's future, Americans are hurrying to begin receiving Social Security benefits at the earliest age of 62.
Although making an early claim results in instant money, there are important trade-offs that many people might not completely comprehend.
The reasons behind Americans' early Social Security claims Many Americans are rushing to claim benefits as soon as they become available due to concerns about Social Security's long-term sustainability.
Some retirees are adopting a "bird in hand" mentality, preferring guaranteed benefits now over potentially larger — but seemingly less assured — payments later, in response to headlines warning about funding shortages and political conflicts regarding the program's future.
This fear is not wholly unjustified. Although the program itself isn't going away, it is anticipated that Social Security's trust funds will experience difficulties.
Despite the permanent drop in monthly payouts, anxious pre-retirees are choosing to begin at age 62 instead of waiting until full retirement age (66 or 67 for the majority of present employees) or age 70 for maximum benefits.
A 30% reduction in monthly income may result from filing for Social Security at age 62 rather than waiting until full retirement age.
For the duration of retirement, this reduction is permanent. This choice may leave tens of thousands of dollars on the table for retirees who live into their 80s or beyond, which is becoming more and more typical.
Think about this: If a person claims at age 62, they may only receive $1,400, even if they would have been eligible for a $2,000 monthly benefit at full retirement age. Over the course of a long retirement, the $600 monthly difference might amount to hundreds of thousands of dollars, or $7,200 yearly.