Signing up without understanding these things could hurt you big-time.
Turning 62 is a big milestone for Americans. For many, it marks the end of a long career and possibly the beginning of monthly Social Security checks showing up in their bank accounts. But if you plan to apply for benefits in 2024, there are three things you need to be aware of.
1. Claiming early reduces your benefit
The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. It's anywhere from 66 to 67 for today's workers. Receiving benefits before your FRA is considered claiming early and shrinks your checks.
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You'll lose 5/9 of 1% per month for your first 36 months of early claiming and 5/12 of 1% per month for any additional months of early claiming beyond those 36. That translates to a 25% loss for those with FRAs of 66 who apply immediately at 62 or a 30% loss for those with FRAs of 67.
This doesn't mean that claiming early is always the wrong choice, though. It makes sense for those who don't have long life expectancies and those who cannot afford to cover their bills without Social Security. But if you expect to live into your 80s or beyond, you may get more money overall by delaying benefits.
You can even delay beyond your FRA if you'd like. Your checks will continue increasing past this point by 2/3 of 1% per month until you reach your maximum benefit at 70.
2. You could run into the earnings test
The Social Security earnings test withholds money from the checks of those claiming Social Security under their FRA if they earn too much. Thresholds vary over time, but in 2024, you'll lose $1 from your checks for every $2 you earn over $22,320. If you'll reach your FRA in 2024, you only lose $1 for every $3 you earn over $59,520, assuming you earn this much before your birthday.
Fortunately, money withheld due to the earnings test isn't gone. When you reach your FRA, the Social Security Administration increases your benefit a little to account for what it previously withheld. But your new checks won't be as large as what you would have gotten had you delayed Social Security until your FRA in the first place.
3. You probably can't claim the month you turn 62
You become eligible for Social Security in the first month that you're 62 for the entire month. So unless you were born on the first of a month, you'll have to wait until the month after your birthday to claim.
This isn't necessarily a bad thing. As discussed above, waiting a month will add 5/12 of 1% to your checks. But you need to be prepared for this so you know when you can expect your first check. If your birthday is in January, you become eligible in February, but February benefits aren't paid until March. So you would need to cover all your expenses on your own for the first two months of the year.
You can still apply up to four months in advance of when you want checks to start. This is a good idea because it ensures you don't forget to apply and gives you plenty of time to deal with any hiccups that come up with your application.
If you understand the three above things and are comfortable with them, then you may want to claim Social Security in 2024. You may even want to start gathering information, like your Social Security number, birth certificate, and W-2s so you're ready to apply as soon as you can. But if any of the above things worry you, you may want to wait to sign up.
