Social Security was created in 1935 to provide older Americans with some financial security. The program has undergone many changes in the nearly 90 years since it was created. But what if you don’t need Social Security during retirement? You may want to consider claiming it as early as possible.
Within this article, we’ll dive a little deeper into Social Security and discuss why it might make sense to claim it as soon as possible if you don’t need the money for retirement.
Conventional Thinking About Taking Social Security
For anyone born in 1960 or later, the full retirement age for Social Security is 67. If you file after you reach 67, you will get your full monthly Social Security benefit based on your personal earnings history.
The earliest you can take Social Security is age 62. If you file at 62, you will lose 30% of the full Social Security benefits you would have received at 67. If you file at 64, you will lose 20% of the full benefits. This continues until age 67 when you receive your full benefits.
For every month you wait between the ages of 67 and 70, you will receive even more money. If you wait until 68, you will receive 108% of your Social Security benefits. This increases by 8% each year until the age of 70.
This is why some experts say waiting until your full retirement age or longer to take Social Security is smart. It will allow you to receive as much as possible.
What To Do If You Don’t Need Social Security for Retirement
If you are fortunate enough to have other sources of retirement income, you may not need Social Security. In this case, the best option may be to take your benefits early.
As money expert David Bach says: “If you don’t need Social Security for retirement, you should take it the moment you’re available to take it. Why? Because it’s free extra money to enjoy now.”
Some people also think Social Security benefits will be reduced and the benefit ages will be pushed out even further in the coming years. They argue that you should withdraw your Social Security before this happens and make sure you’re planning other sources of retirement income, like 401(k)s and IRA accounts.
If you don’t need the Social Security money to live on during retirement and want to claim your benefit early, here are a few ideas of what you could do with the money.
Invest the Money
One option is to take the money from Social Security and invest it. Since your Social Security check would be reduced because you took it at age 62 instead of 70, any investment return greater than 8% over those eight years could put you ahead.
“Even if you’re financially comfortable and don’t necessarily rely on Social Security for your retirement income, there are strategic reasons to consider claiming your benefits early, at age 62,” said Michael Ryan, financial planner and founder of Michael Ryan Money. “One primary reason is the opportunity to invest these funds more aggressively than the government does. By taking these payments early and investing them wisely, you could earn a rate of return that outpaces the incremental increase you would get by delaying your benefits until full retirement age or later.”
Start a New Business
If you have a business idea you’ve always wanted to try, you could use your Social Security money to fund the new business. Your Social Security would provide the needed capital to get things off the ground. Plus, you could quit your full-time job and focus on the business instead of trying to juggle both simultaneously.
Yes, you’ll be taking a benefit cut by claiming your Social Security early, but if the business does well, you’ll likely come out ahead.
Just keep in mind that a lot of businesses fail. Be sure to plan other sources of retirement income, and don’t rely entirely on expected profits from your new business.
Pursue a New ‘Fun’ Career
If you’ve always dreamed of doing something else for work, taking Social Security early may allow you to follow that dream. Maybe your dream job is not as lucrative or stable as the career you’ve spent most of your life doing. But with Social Security, you’ll be able to pursue this passion while still having the energy, time and health.
“Like in financial planning, life is a journey filled with unexpected twists,” Ryan said. “By claiming Social Security early, you might open doors to new opportunities and experiences you’ve been dreaming about. It’s not solely about the numbers; it’s about embracing the chance to create unforgettable memories and explore passions.”
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