Q: I will be turning 62 next year and would like to begin collecting early Social Security benefits. Am I penalized once I turn full retirement age of 66 for the amount I would receive then? Or does it revert to the amount on my Social Security yearly statement?
A: Generally, if you choose to begin receiving Social Security benefits before your full retirement age, yes, you will permanently reduce your monthly benefit.
For people born between 1943 and 1954, full retirement age is 66 exactly. If you begin collecting at 62, your primary amount will be reduced by 25 percent. So if your full retirement age benefit is $1,000 per month, it would be permanently reduced to $750 (plus cost of living adjustments) at age 62.
Here’s another “give up” when claiming benefits early: You can earn delayed retirement credits by delaying claiming after full retirement age up until age 70. For those boomers born between 1943 and 1954, like you, that’s a full four years of delayed benefits, increasing at 8 percent per year, for a total boost of 32 percent above the original primary insurance amount of $1,000, to $1,320. That’s a whopping 76 percent increase from the benefit amount if claimed at age 62.
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Spousal and survivor benefits are also reduced by an early claim. Of course, if you are in ill health and aren’t trying to protect income for a spouse or you have no other retirement income sources, delaying benefits probably isn’t a realistic option.
There are free and paid services online that will help you figure out your best claiming strategy. Among them: AARP (www.aarp.org/work/social-security/social-security-benefits-calculator.html), Bedrock Capital Management (www.bedrockcapital.com) and Social Security Solutions (www.socialsecuritysolutions.com).