Starting Social Security before Full Retirement Age (FRA). There’s lots of talk about it these days. It might be because of inflation, or being afraid the Social Security system will run out of money, or because of failing health or needing to become caregiver for a family member. There are two items to consider before making your final decision.
First, keep in mind that taking Social Security early means a permanently reduced benefit. The Social Security Administration penalizes you for not waiting until your Full Retirement Age (FRA). Once you begin taking Social Security, the only increase will be an annual cost-of-living-adjustment (COLA) which is supposed to keep you even with inflation. There is a Social Security myth that says you can take a reduced benefit before your Full Retirement Age and when you reach your FRA, your benefit bumps up to what you would have received if you’d waited. NOT TRUE. Taking Social Security early creates a PERMANENTLY reduced benefit. You can find your Full Retirement Age here.
Next, there’s the question, “How much will my benefit be reduced?” Here’s the way Social Security figures it.
Social Security reduces your check by 5/9 of one percent for every month you get a benefit before Full Retirement Age up to 36 months. If your benefit begins more than 36 months before Full Retirement Age, those additional months are reduced by 5/12 of one percent per month.
For example, if you begin Social Security 60 months before your Full Retirement Age your benefit will be reduced by about 30 percent. That’s 36 months times 5/9 of one percent, or 0.56, PLUS 24 months times 5/12 of one percent or 0.42.
Here’s the math. 36 months times 0.56 is a little over 20% (20.16%) and 24 months times 0.42 is just over 10 percent (10.08%). That’s where the 30% comes from in this example. So, if your Social Security check at Full Retirement Age would be $1,000 a month, and you begin your benefit 60 months before Full Retirement Age, you would receive approximately $700 dollars.
There’s nothing wrong with taking your Social Security benefit before you reach Full Retirement Age. Just make sure you’ve considered everything before you pull the trigger.
Disclaimer
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.
