Editor update: Some features of social security, including the buyback feature mentioned in this article (which dates to Nov 2011) have changed. Please consult with the Social Security Administration or your advisor for the latest data on Social Security benefits.
From FA News:
This is a topic I will analyze more deeply in the future on my business site (WalnutHillAdvisorsLLC.com) but for now, here is an interesting short article outlining some options for those considering social security at 62. Some key points:
- 1. consider longevity issues when making a decision to take SS at 62 (in economics, living too long is called ‘longevity RISK’ hehe)
- 2. Taking social security at 62 could mean a 20% loss of benefits
- 3. Social security will get reduced if you are still earning income and below NRA – Normal Retirement Age (67 for most us – lucky French!)
Interestingly though, most people don’t know that you can pay back your early social security benefits and get the higher benefit at NRA. From the article:
Meanwhile, many beneficiaries don’t realize there is a way to get full benefits later even if one starts collecting earlier. “A lot of people and some advisors do not know you can take Social Security at 62 (or any age up to the full retirement age) and then pay it back at full retirement age without interest and begin collecting the full retirement amount, Miller says.
“It is an interest free loan,” he adds, “and, if you get a tax refund from the taxes you paid on the Social Security during those first years, you can use those proceeds to pay the taxes for a Roth conversion.”
Analyzing this payback option is like analyzing an immediate annuity. If you would like to look into this, it would be beneficial to seek professional advice and do a numbers analysis. For more on retirement income planning, here are some more in depth articles from my business site WalnutHillAdvisorsLLC.com:
For a list of articles, go HERE.