Is it a good idea to collect social security at 62, continue to work & contribute that amount from before tax payroll to a 401(k)

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Answered by Ray Thompson, Financial Adviser in New Orleans, LA
Absolutely not. The penalty is too great. Defer collection of SS until your full retirement age (i.e. 66) at least. In most cases, it is best to defer collection of SS until age 70 with the guaranteed benefit increase of 8% each year (total 32%) until age 70. By all means continue to make 401k contributions to the greatest extent possible. | 09.19.14 @ 19:18
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
Answered by MoneyTips Writing Staff, Financial Adviser in Los Angeles, CA
Ebong Eka, CPA shared the following answer with us:

Doesn't make sense to do that at this point. The penalty you'd pay is greater than the return you'd receive. If you start collecting social security at 62 yrs old, your benefit is reduced by 25%. So if your full retirement age is 66 yrs old, and you would receive $1,000. If you start collecting at 62 yrs of age, you'll receive only $750.

You'd have to find an investment opportunity that yields a 25% return just to break even and you won't! If you do- run! If you wait 8 years, you can get a total increase of 32% or $1,320.


Ebong Eka, CPA and author of Start Me Up, is one of our Top 30 Most Influential People in Personal Finance and Wealth

| 09.22.14 @ 16:51
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
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Answered by ken
I'm age 60 on disability, my wife is 56 and in much worse shape than I, She has not worked for about 10 years. She has paid in a lot more than I, but not for the last 10 years. Why isn't she eligible for ssi disability? | 01.15.15 @ 21:00
Comments 2  
Tim — Only take early out on Social Security if you can well and truly retire. Ignore all the babble about what happens if you live until the next Ice Age, you could get run over by a truck tomorrow. On the other hand, unless you have a rock-ribbed, defined benefit pension, or a $1 million-plus in savings, you will probably need social security to make ends meet. The thing about early pension is, the penalties kill you. If you are eligible for $900/mo in social security, and make $36,000 at work (about $18/hr), you get nothing from the Feds. On the other hand, if you are 62 and well off enough to walk out the door, then you get that $900 to help pay the bills, Have her apply for disability. If it gets rejected, apply again. If they ask for a doctor's evaluation, go see the doct0r. If they still stiff you, call your congressman or senator. My daughter is a traumatic double amputee above the knee -- it took three applications and a call from then Senator Jim Webb to get her disability approved. | 10.30.15 @ 18:09
Gerald Mendes, Investment Advisor Representative in San Rafael, CA — Your wife may indeed be eligible for Social Security Disability Insurance payments, based on a lengthy application and waiting period while the SSA looks through her medical records and physician comments. Do not apply for SSI if your wife has paid into Social Security; SSI is for indigent or people who have little to know contributions to Social Security. SSDI is a different program, and sounds like the correct fit for your wife. The difficult issue in qualifying for SSDI is that her disability will be determined, not by her physical or mental status alone -- but primarily by whether or not she can work at any job at all, and earn a threshold amount. That's why her physician's records are so important. Talk with her physician first, and explain your dilemma. If the physician says she's 100% disabled and is not likely to recover within the next 12 months, and cannot hold a job because of mental or physical limitations -- then she probably qualifies. If she's already been unable to work for at least 12 months, and that status is supported in her physician's records over the preceding 12 months, they she probably can qualify on that basis unless there's any prediction of recovery in the near future. Best of luck to you both. | 05.17.16 @ 23:24
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
Answered by Arin Moradian, Financial Adviser in Glendale, CA
62 yrs old 75% of Social Security
65 yrs old 100% Social Security
72 yrs old 130% Social Security
If you wait until 72 and live up to 85, there is a $500,000 difference | 03.04.15 @ 00:25
Comment 1  
Amots — Arin, I'm not a financial adviser, but I need to correct your numbers. Without taking Taxes and spouse in the calculations, the break even point for a 10 years difference is over 13 years (163 month), so if you start at 62 you have a 10 years head-start on age 72. | 04.03.16 @ 22:09
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
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Answered by Brian
I dont think CPA should call this a dumb idea without first doing some numbers. First, I dont need to make 25% a year. Let us say I can make 8% a year. I assumed that my first social security check started in Jan at 62. I also used 1000 dollars as normal SS paycheck i.e. $750 at 62, $1000 at 66 and $1320 at 70. The question stated that if he invested the money and kept working so these numbers also assume that he will not lose the 1 dollar for every 2 dollars earned. At an annual 8% return calculated monthly, I would have $56008.28 on Jan 1 of my 66th birthday. The age 62 stops investing his $750 a month and the age 66 now starts receiving his $1000 per month. Assuming that his $56,008.28 never made another dime, it would take til age 84 and 9 months for the age 66 to earn as much as the 62 guy. This happens at $224,008 total received/investment earned mark. The age 70 guy catches up at age 83 and a half. If that original $56k was kept in investments, then it takes even longer. Bad idea? I think for some people, this could be a very good idea.... | 05.05.15 @ 22:39
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
Answered by Kim Miller, CFP®PRO+ in Redmond, WA
I don't see anyone here mention that collecting SS @ 62 and continuing to work will cause a takeback of the SS benefits. For every $2 of earnings over the threshold of $15,720, SS takes back $1 of benefits. This takeback does not apply after the worker has reached their Full Retirement Age (66 in this case). There are many SS claiming strategies that make sense, but in most cases, claiming at age 62 is not one of them. | 06.29.15 @ 23:38
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
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Answered by Julie
Everyone here is assuming you will live to be 66 or 70. I retired at 62 and am glad that I chose to do so, Money is not everything, enjoying life should be the main objective in our senior years. While you are working, pay all debts, so all you need to be concerned about are food, utilities, etc. Everything I own is paid for, I don't have money to burn but I have enough for necessities and a few extras. Again, I am glad I chose to retire at 62 and enjoy life. | 06.30.15 @ 03:33
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
Answered by James Kinney, Financial Adviser in Bridgewater, NJ
There are very few absolutes in personal finance. For those who expect to live into their 80s and beyond, it is best to wait. If you think you may not make it to 75, it might make sense to collect earlier, and save the money (which unlike unclaimed benefits social security will go to your heirs after death). Realize that the government will take 50% of income over 14500 if you collect SS at 62 so the immediate impact on your cash flow may not be as favorable as you hope, but you get some of that back in the long run in the form of higher payments after you fully retire. | 10.21.15 @ 11:48
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
Answered by James Biasotti, Financial Adviser in Roseville, CA
Typically if you can earn at return on Social Security payments- reinvest them if possible to take it early- you need to beware of the earnings test though. But okay strategy- you need to look at taxes also. Probably be better to defer social security and let it increase depending on your longevity -life expectancy. From full retirement Age (FRA) it increases by 8% to age 70. | 11.19.15 @ 20:42
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 10:04
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Answered by

Kim Miller
Kim Miller, CFP®PRO+ in Redmond, WA

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