Claiming Social Security at 62: What You’re Really Giving Up.

It sounds like a smart move: claim your Social Security early, invest the checks, and get ahead.
But for many high earners, that strategy can backfire… and cost far more than expected. As Victoria Larson with Vitality Investments and Erin Kennedy discuss, claiming early and investing the benefit isn’t as simple as it sounds. 

🎯 We also break down:
• How the Social Security earnings test can wipe out your benefit while you’re still working
• The true cost of claiming at 62 vs. waiting until full retirement age, or even 70
• The often-overlooked impact on your spouse, especially survivor benefits
💡 Bottom line: Timing when you claim Social Security isn’t just about getting paid sooner, it’s about maximizing income, protecting your spouse, and avoiding costly mistakes. It's one of the most important decisions you will make in retirement, and it's something Victoria specializes in. To determine when you should claim, call 941-413-0331 or visit https://lnkd.in/eq4tecsp

Transcript:

Erin Kennedy  0:00  

Hi, Victoria. So, good to see you today. We are talking through claiming Social Security at 62 What you're really giving up? Claiming your benefits early sounds appealing, but the trade-offs can be bigger than people expect. That being said, despite the math, and despite the fact that we're all told, wait as long as you can, Victoria, a lot of people claim early. Why is that?

Victoria Larson  0:26  

Me too. It's largely tied to emotional versus financial factors. It could come from a forced retirement where someone is let go, and then there's a sense of panic going, where am I going to get that paycheck, similar though, is despite even folks with large assets, they'll sometimes look at me going, "Hey, where's my income? They're so prone to saying, "Hey, or "I normally get a monthly paycheck, where is this coming from? So they just take it. Then the other is really a cultural message, and some of that messaging is coming from the headlines that says, hey, if nothing goes changed with how Medicare Social Security is funded, everyone's going to get a 22% pay cut on their Social Security benefits in 2032 so that, along with, hey, you earned it, might as well take it. Can lead people to make a really costly mistake and take those benefits earlier than when ideal,

Erin Kennedy  1:30  

right? Really good points. So now let's talk through the earnings test. How does the $1 for every two rule affect people who are still working and claiming social security,

Victoria Larson  1:42  

right? So, while working, if you're working and you claim your social security before full retirement age, there's an earnings limit, and you can see here on the slide that it says 24,004 80. So, what that means is for every $2 you earn north of that, Social Security Administration is going to withhold $1 of benefits. So, let me give you an example here. Let's say you have a part-time job where you earn $50,000 a year, you're about 20-$5,000 above that threshold. So, Social Security Administration is going to hold back $12,500 benefits. Now the year that you reach your full retirement age, that limit is higher. It's that $65,180 that's then for every $3 you earn above that, they withhold $1 The these dollars are not gone forever, they get reapplied into the calculation, but you're not going to get that windfall of $12,000 like I just gave in that example. At full retirement age, you can earn as much as you want and get all your benefits,

Erin Kennedy  2:57  

right? Really important to consider that. So, just to kind of show people what it looks like in a different way, Victoria, I really like this chart. Let's walk through the math. What you actually give up if you claim early at 62 versus waiting until full retirement age versus waiting until 70.

Victoria Larson  3:13  

Sure, so as I said, full retirement age is for most people it's 67 so you're getting 100% of your benefits, but if you take it at 62 you're only going to receive 70% of those benefits, so that's a 30% pay cut here now. To contrast, though, if you delay taking your social security till 70, you're getting delayed credits, boosting up those benefits by another 24% that is a big range in people's paychecks, and the only thing they're deciding on is the age in which they take it, might have the same earnings, same years of contributions, wildly different amounts of money,

Erin Kennedy  3:58  

and how does claiming early affect a spouse, particularly when it comes to survivor benefits.

Victoria Larson  4:04  

Yeah, that's incredibly important here. So, when it's a husband and wife, we're taking into consideration all their assets combined, right? Well, social security is one of your biggest assets that needs to be optimized, so if an individual who is the high income earner takes his benefits at 62 that's a pay cut. And upon death of a spouse, the surviving spouse gets to only keep one check, and it's the highest one possible. If that high income earner delays taking that social security, he's putting that, or he is putting, or she putting that surviving spouse in a much better position with a stronger income floor in retirement.

Erin Kennedy  4:50  

I love that you're always thinking about the whole family, Victoria. It's really helpful to talk this through again, considering recent headlines about the trust fund being depleted soon. So, I'm great. For your time, again, this is going to be a different answer for everybody else to want to claim. So, if somebody would like to sit down with you and crunch the numbers, what's the best way to reach you?

Victoria Larson  5:08  

They can contact us at Vitalityinvestments.org

Erin Kennedy  5:13  

All right, perfect. Victoria, again, thank you so much for your time today. I really appreciate it.