Financial planning for seniors is very critical and requires utmost knowledge about the benefits you will be receiving from government like Medicare, Medicaid and Social Security. There are many seniors who do not know much about them and so I would like to cover some important points about Social Security in this article.
The biggest concern for seniors in finance is when to start collecting Social Security payments. As most of them know Social Security is available at an early age of 62 but with some reduction of benefits. The question is should one wait till the full retirement age to collect Social Security or should one start at age 62 with reduced benefits? Specially when you here so much about Social Security being in problem and can close its door to today’s young generation.
I have seen some of the seniors worried that if they wait till full retirement age may be Social Security will reduce its benefits or even stop paying! To be honest I don’t think current seniors are going to face any problems in coming years with changes to the Social Security. The problem is going to be to today’s young working class. If you are senior I would suggest that at least do not worry about Social Security closing doors on you.
With Private companies Pension system slowly but surely going away the Social Security becomes a very big vehicle for your retirement and any decision pertaining to it should be made with calm head. Any rash decision could create a big financial problem for you.
Its very important that you cover up every point before deciding to cash in Social Security at early age of 62. There are some big drawback and some benefits for withdrawing Social Security at an early age. I would go through them and help you all to make a decision.
Pro for withdrawing at early age of 62:
- You will receive smaller benefits for longer time. If you live past a certain age you can actually earn the same or even more by retiring early. I have worked out a example for this scenario.
Suppose you are going to receive the benefit of $1000.00 at age of 67 and you withdraw Social Security payments at age 62 and you get paid $700. If you live up to about 80 years you actually can earn more by withdrawing early then to wait till actual retirement age. The calculator is available at http://www.ssa.gov/OACT/quickcalc/when2retire.html I would suggest that you go to the sebpage and go through your personal scenario.
Cons for withdrawing at early age of 62:
- Your monthly benefit is permanently reduced. The reduction is substantial so I would suggest that you give a look at the figures. For example: If you are going to receive a benefit of $1000.00 at age 67 you will only receive benefit of $700.00 at age 62. That is a reduction of 30% and similarly your spouse benefits also goes down. You should have a look at the different figures for different age group given on Social Security website. The link is http://www.ssa.gov/retire2/agereduction.htm I would suggest that you go through the page to find out how much your monthly benefits could decrease with your actual scenario.
You should consider the pro and con of withdrawing early and decide whatever is good for you. Everyone’s situation is different and if something works for someone it does not necessarily mean that it works for everyone. Keep that in mind. If you are working past age of 62 I would suggest that you do not withdraw your social security payments as Social Security reduces greatly with that scenario. For up to date information on Social Security and its new reforms I would suggest that you go to the following website: http://www.ssa.gov and go through some of the important information.