Navigating the intricacies of Social Security retirement benefits is a significant concern for many Americans in their 60s. The decision on when to file becomes crucial, and while there’s no one-size-fits-all answer, claiming Social Security at 65 presents a compelling case, offering a happy medium between early and delayed claims.
The Goldilocks Approach
Much like Goldilocks finding the perfect balance in the three bears’ home, claiming Social Security at 65 can be the sweet spot for many individuals. It strikes a balance between the earliest possible age, 62, and waiting until 70 for maximum monthly payments. This approach is particularly appealing for those eager to retire without significantly reducing the size of their benefit checks.
Mitigating the Penalty
While there is a penalty for collecting benefits before reaching full retirement age (FRA), it’s a more modest percentage at 65 than at 62. Waiting until FRA or beyond to claim can boost monthly benefits further, but it might mean working longer than desired—a sacrifice many are unwilling to make.
The Medicare Advantage
An undeniable advantage of claiming Social Security at 65 is Medicare eligibility. As one approaches this age milestone, Medicare becomes accessible, a crucial benefit given the substantial healthcare costs for seniors. Retiring fully before 65 might mean shouldering health insurance expenses independently, often more expensive than employer-provided plans.
The Working Dynamic
Claiming Social Security at 65 doesn’t necessitate complete retirement. Continued part-time or full-time work is an option to consider, providing flexibility for those not ready to exit the workforce entirely. However, it’s essential to be mindful of potential benefit reductions if income exceeds specific limits set by the Social Security Administration.
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Earning While Claiming
The Social Security Administration may withhold $1 for every $2 earned above the annual limit if one is below FRA for the entire year. In 2024, this limit is $22,320. During the year of reaching FRA, the withholding reduces to $1 for every $3 earned above the higher annual limit of $59,520 in 2024. Once FRA is reached, benefits remain unaffected by earned income.
The Ever-Attractive Happy Medium
Choosing to work even after claiming Social Security at 65 can make this happy medium even more appealing. With the flexibility to continue employment and the advantage of Medicare coverage, this option strikes a chord for those seeking a balanced approach to retirement benefits.
