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Should You Start Social Security Early in Light of COVID-19?

The COVID-19 pandemic and subsequent recession have devastated retirement accounts and given new life to the fears about Social Security's longevity. Whatever your plans for Social Security were before all of this, you're probably wondering if you ought to change them now in light of recent events.

You might be tempted to start benefits early to ensure a reliable, consistent stream of income amid all this uncertainty. That could be the right call for some, but it depends on several factors, including what other savings you have, how long you expect to live, and the reason behind your desire to start benefits early. Here's what you need to know before deciding whether it's the right choice for you.

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Starting early means smaller checks

Your Social Security benefit is determined in part by the age you begin claiming. If you want the full amount you're entitled to based on your work record, you must wait to begin benefits until your full retirement age (FRA). This is somewhere between 66 and 67, depending on your birth year. You may start benefits as early as 62, but if you do this, you'll get only 70% of your scheduled benefit amount per check if your FRA is 67 or 75% if your FRA is 66. Every month you delay benefits increases your checks slightly until you reach the maximum benefit at 70. This is 124% of your scheduled benefit per check if your FRA is 67 or 132% if your FRA is 66.

This doesn't mean delaying benefits is always the right call. It means larger checks, but fewer of them, and it takes many years to start outearning someone with an identical benefit amount who began Social Security at an earlier age. If you're concerned you won't live long enough to make delaying benefits worthwhile, starting early might be the better choice.

Starting early is also a better option than burning through all of your retirement savings prematurely or going into debt to cover your expenses. If COVID-19 has put your finances in a precarious position, Social Security can be a lifeline to help slow the drain on your retirement savings. You might get less money from Social Security over your lifetime by starting early, but you could still end up in a better position overall if you're able to stretch out your savings over a longer time and stay out of debt.

Social Security isn't going to disappear

The COVID-19 pandemic is hurting Social Security as much as the individuals who rely upon it. Fewer people working due to state lockdowns and social distancing procedures means fewer people paying Social Security taxes on their earnings, putting the program under even greater financial strain. The Bipartisan Policy Center estimates Social Security's trust funds could now be depleted as soon as 2029 due to the pandemic.

But this doesn't mean the program would go away. Benefit cuts would have to happen if the government didn't make any changes to the program, but it may come up with another way to shore up Social Security's shortfall before it comes to that. It's just too soon to tell.

Starting Social Security now because you fear benefits will soon disappear may not be the best option. You already get smaller checks if you start Social Security before your FRA, and if the government does initiate a benefit cut, that'll mean you could get even less in the future. But one thing that isn't going to change is that those who delay benefits will still get more per check than they would have if they began benefits early. So if you don't need the money right now, delaying benefits is still a better bet for getting the most money overall.

Other ways to get the money you need

Explore other options before starting Social Security early if you're worried about short-changing yourself. Use up any emergency savings you have or consider starting a side hustle to get some extra money coming in to help you cover your bills. You can also try reducing your spending to help your existing savings go further.

Another option is to start benefits now and either withdraw your application within 12 months or suspend benefits when you reach your FRA. If you withdraw your application and pay back all the money you've received in benefits so far, it will be as if you've never claimed Social Security and you can take advantage of larger benefits later on when you're ready to start claiming for real. This is a good option for those who only need a little support during the COVID-19 pandemic until they can return to work.

Suspending benefits is an option if you're unable to pay back all the Social Security benefits you've received within the allotted time frame to withdraw your application. You can do this once you reach your FRA. The government will stop sending you benefit checks until you reach 70 or until you request they start again. In the meantime, you'll accrue delayed retirement credits, which will net you larger Social Security checks when you begin claiming them again.

It's smart for everyone to review their plans for retirement and Social Security in light of the pandemic and recession to make sure they're still on track for their goals. If you've changed your plans about Social Security and are now considering claiming benefits early, make sure you understand the consequences of this decision and weigh other possibilities for getting the money you need as well.

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