Are you planning to collect Social Security retirement benefits at age 62? You’re not alone. Nearly one in three Americans did so in 2021, according to the latest data analyzed by the Congressional Research Service.
Some may soon be more motivated to apply for retirement benefits sooner. Here’s why claiming Social Security at age 62 will be a more attractive option in 2024 than in the past.
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The disadvantages of receiving Social Security at age 62
There are some major drawbacks to receiving Social Security retirement benefits at age 62. The most important is the heavy financial penalty.
Your Social Security benefits will be reduced by five-ninths of 1 percent for each month you receive benefits before your full retirement age (FRA). This penalty, however, only applies to the first 36 months before your FRA. If you start collecting benefits early, you will be penalized an additional five-twelfths of 1%. For anyone with an FRA of 67, starting benefits at age 62 will reduce your monthly payment by 30%.
One way to make up for the money you’ll lose when you start collecting retirement benefits at age 62 is to continue working a little. However, this approach also presents a potential problem. If you earn too much, your benefits will also be reduced.
The Social Security Administration (SSA) will deduct $1 from your retirement benefits for every $2 you earn above a specified threshold if you begin receiving benefits before your FRA. In the year you reach your FRA, this deduction increases to $1 for every $3 above a different threshold. Once you reach your FRA, the SSA will no longer deduct anything from your income.
The good news is that you will eventually get back the amounts deducted once you reach your FRA. The bad news is that you could earn less than you would like for several years because of these regulations.
Keep more in 24
These two disadvantages will still be relevant in 2024. However, one of them will be less problematic than in the past.
If you decide to start collecting Social Security retirement benefits at age 62 while continuing to work, you will be able to keep more of your income. The earnings limit for the $1 for every $2 deduction will increase from $21,240 in 2023 to $22,320 in 2024.
As mentioned earlier, there is a different income limit for the year in which you reach your FRA. If you reach this age in 2024, the threshold will be $59,520, compared to $56,520 in 2023.
Granted, these increases may not seem that significant. However, income limits for early retirement are higher than they have ever been.
It always pays to wait
Different people have different reasons for wanting to collect Social Security retirement benefits at age 62. For most individuals, however, it is still helpful to wait at least until your FRA.
In fact, waiting until age 70 to collect Social Security benefits is the most financially beneficial option for the vast majority of Americans. An analysis last year by the National Bureau of Economic Research found that more than 90 percent of individuals would receive larger lifetime benefits if they waited until age 70.
However, the downside of filing for retirement benefits early won’t be as painful next year as it has been in the past. The increase in income limits may well be enough to tip the scales for some people considering collecting Social Security benefits at age 62.
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