More Than a Quarter of Women Plan To Take Social Security at 62 — Why This Might Be a Mistake
Written by
Laura Bogart
Edited by
Ashleigh Ray
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For many Americans, collecting monthly Social Security benefits is simply a natural part of life. They might not know it, but they follow in the tradition set by a 65-year-old legal secretary named Ida May Fuller.
In 1940, Fuller approached her local Security Security office to learn about how the program worked. While she knew that she’d paid into Social Security, she didn’t know if she’d see anything back. After a clerk helped her apply, she became the first person to receive recurring monthly Social Security benefits. Fuller would go on to receive them until 1975, when she passed away at age 100.
This story, shared by the Social Security Administration blog, highlights how instrumental women are to the history of Social Security — and what a large role these benefits play in women’s lives. Yet a recent survey from GOBankingRates recently found that 26% of women have taken or plan to take their benefits at age 62, despite the advice of many financial planners and experts.
GOBankingRates spoke with experts to learn more about why taking benefits at age 62 could be a mistake for modern women and offer insights about how to be savvier about Social Security — just like Ida May Fuller.
You’re Lowering Your Benefits
According to Regina McCann Hess, a certified financial planner (CFP), certified divorce financial analyst (CDFA) and author of Super Woman Wealth: How to Become Your Own Financial Hero, one of the biggest potential obstacles toward women maximizing their benefits is an overall lack of education about Social Security.
“There are plenty of conversations about how people want to live out their golden years but few focus on how to plan retirement income in a way to make the dollars stretch for all those years,” said McCann Hess.
She added that getting Social Security too early can permanently lower your benefits and filing for them at age 62 has an immediately adverse effect on your retirement income.
“Assuming your full retirement age (FRA) is 67, and you wait until then to turn on your benefit, you will receive your full amount. However, if you turn it on early at age 62, you will get 30% less,” she said. “This is a permanent decrease and will remain in effect for the rest of your life.”
McCann Hess offered an example with real-world numbers, sharing that someone collecting Social Security benefits at age 67 might hypothetically walk away with $2,000 a month, while that same person, collecting at age 62, might only receive $1,400 per month.
Even if these numbers don’t feel dramatically different, McCann Hess reminded women to consider inflation.
She warned, “Inflation can eat away at your lifestyle and after a while, you may not be able to afford the same standard of living. Taking a 30% decreased payment could have long lasting repercussions.”
You Risk Problems If You Continue To Work
Though the extra income from Social Security could make an immediate difference in the day-to-day of a woman’s life — especially if she’s encountered difficulties like health issues or a job loss — taking benefits too early can come with long-term consequences.
Women hoping to use Social Security to augment existing income from their jobs should know they’re risking potential penalties.
As Doug Roller, owner and investment advisor representative at Crossroads Financial Group, explained: “If a woman continues to work while receiving benefits at 62, her Social Security payments may be reduced if her earnings exceed certain thresholds, affecting the overall income she receives.”
You Limit Your Earnings
Many people may come to think of Social Security as “their money” to take out as they please. However, activating your benefits before you reach full retirement age comes with an earnings limit.
Once a woman makes over $22,320 for a full year before reaching FRA, she’d find $1 withheld for every $2 in earnings above that amount.
McCann Hess called that predicament, “a double whammy. You get less income from Social Security and then if you make over $22,320, you must give some of it back.”
She suggested that waiting until at least Full Retirement Age can be a much better approach than taking it early. “You still receive 100% of your benefit,” she continued. “Plus, once you’re past FRA, your benefits are not withheld if you are also still working.”
Still, waiting until age 70 to get your benefits may be the best course of action. McCann Hess said that doing so can add an additional 24% to your benefits.
She also advised married couples might consider having the lower-earning spouse collect benefits at FRA, while the higher-earning spouse waits until they turn 70 to do so.
“It is also a way to increase a survivor benefit to the lower-earning widow(er),” she said. “In this scenario, the lower earner steps up to the higher benefit as the surviving spouse.”
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