Those who retire early but live long lose a bundle in Social Security benefits
Only about 5 percent of retirees wait until full retirement age to claim Social Security benefits.
Retiring early can cost dearly, according to the Social Security Administration (SSA), especially if you live a long time.
The SSA calculates that retirees who live to age 90 would lose $39,000 in benefits if they retire at age 62.
Some financial analysts say retiring early would cost far more because of the cost-of-living increases that boost Social Security checks. They figure the loss would be $83,000 for those who take benefits at 62 and live to age 90 and nearly $149,000 for those who live to age 95. The reason: Cost-of-living adjustments would apply to larger sums if a person retires at age 66.
Age 77 is the SSA’s estimated break even point. If you think you will die before age 77, retire early. If you think you will live past age 77, delay retirement as long as possible.
People are, in fact, living longer. There is a 41 percent chance that a 62-year-old woman will live to age 90. A 62-year-old man has a 29 percent chance.
For a married couple, there’s a 58 percent chance that one of them will live to age 90, and a 29 percent chance that one will reach 95. If you don’t think you’ll live very long, taking benefits early could hurt your spouse. A married beneficiary can continue receiving his or her own benefits or the deceased’s benefit, whichever is more. So spouses who take benefits early also reduce the amount the surviving spouse could receive.
People who want to retire early and can afford to live on their retirement savings until age 66 may also save on income tax.
Married couples with $32,000 in combined income face income tax on half of their Social Security benefits.