Whether in the United States or anywhere else in the world, retirement is one of the most important decisions we make throughout our lives, as it involves radically changing the way we live and manage our finances. In the US, the Social Security System allows workers to receive retirement benefits from the age of 62, but this may not be the best option if you are looking to maximize the amount you will get each month. Applying for retirement at 62 can have a significant long-term cost, as the monthly payment will be considerably lower compared to waiting until a later age.
Although many people choose to retire at 62 because they can start receiving benefits earlier, this decision can result in a significant loss of money during retirement. The amount of benefits you get depends on several factors, including the age at which you apply for retirement. By retiring early, you miss out on the opportunity to receive a higher benefit, which could make a big difference to your quality of life over the years.
To avoid making mistakes, it is important to understand how Social Security works in order to make an informed decision about when to retire. The payment system is designed so that benefits increase for each year that the application for retirement is postponed after the age of 62, until the full retirement age is reached. This can have a significant impact on the amount received monthly, which is crucial for those who depend on Social Security as a primary source of income.
Requirements for retirement in the United States
One of the key elements in order to get Social Security benefits is to have worked and paid contributions for a certain number of years. In general, you need to have accumulated at least 40 work credits to be eligible. The minimum age to start getting benefits is 62, although if you apply for retirement before reaching full retirement age, the amount of the benefits will be permanently reduced.
The full retirement age is something that changes depending on the date of birth of each United States citizen. For those born in 1960 or later, the full retirement age is 67. If you decide to wait until this age to retire, you will be able to receive 100% of the benefits to which you are entitled, which can be significantly higher than if you decide to retire at 62.
How to maximize your Social Security payment?
There are several strategies that can help you maximize your monthly Social Security payment, and each one is related to when you decide to start receiving benefits.
- Delaying retirement: If you decide to wait until you are 70 to start receiving benefits, the monthly amount can increase by up to 32% compared to the payments you would receive at 62. It is one of the best ways to maximize benefits, but it requires good financial planning.
- Work for 35 years: Social Security calculates your benefits based on your 35 years of highest-earning work. If you have years when you didn’t work or your income was low, these years are considered zeroes in the calculation. If you work more than 35 years, you will be able to eliminate these years of low or no income, resulting in a higher benefit.
- Maintain a good salary: The higher your salary during those 35 years of work, the more you will get from Social Security. Making sure you are working in a well-paid job and contributing as much as possible to the Social Security system can significantly increase your benefits.
With all this in mind, while retiring at 62 may be an attractive option for many, it is crucial to evaluate the long-term consequences of this decision. Taking the time to understand the Social Security rules and delaying retirement or working longer could result in a substantial improvement in the benefits to be received, which could make a significant difference to financial security in retirement.
