The coronavirus may be throwing a monkey wrench in some retirement plans as the pandemic has caused massive layoffs, but does it make sense to claim Social Security early as a way to make ends meet while the economy recovers?
Last weekend I wrote about how 62 was far and away the most popular age to claim Social Security in 2018, and while delaying benefits can lead to larger monthly checks and potentially more money in the long run, claiming Social Security early can be a useful tool if you need to do it.
The COVID-19 lockdown led to massive job losses in the U.S. and around the world. For some older Americans, that could mean an earlier retirement than planned.
If you fall into that boat, you could try using Social Security as a way to bolster your income as you consider your options during the recovery.
Let’s take a look at some of the benefits of claiming Social Security early.
How Claiming Social Security Could Help During This Crisis
Probably the biggest benefit to claiming Social Security early, at least in the short term, is that you’ll get a boost to your income that you can start planning around very soon.
It typically takes around six weeks for your first Social Security check to arrive after applying, according to Zacks. And if you are struggling to make ends meet after losing your job during the coronavirus crash, those funds can be a lifesaver.
Another benefit to claiming Social Security early is that you won’t have to rely on other retirement savings to get you through this tough period.
A recent study from Fidelity showed 401(k) retirement accounts fell by an average of 19% to $91,400 during the first quarter of 2020 after the stock market crashed in late February and into March.
Markets have recovered a good chunk of those February losses, but the S&P 500 is still sitting around 15% below its Feb. 19 record-high close of 3,386 points. And that means your retirement portfolio probably doesn’t look as healthy as it did at the beginning of the year.
If you claim Social Security early, you can hold off on touching those retirement accounts and give them more time to recover more of those losses.
Remember this: The moment you withdraw from your retirement, those losses that were just a number on your account statement become real. With how volatile markets have been, timing the bottom to get back into investments is no easy task, either.
One Last Consideration
If you do end up claiming Social Security early, but you end up regretting that decision, you can actually withdraw your application within 12 months of your initial filing.
This can be a huge benefit if you’ve landed another job during or after the economic recovery, or you’ve figured out some other way to bolster your income in retirement.
Withdrawing your Social Security is as easy as filling out Social Security Form SSA-521 — but there is one major consideration.
If you choose to stop claiming Social Security, you will have to pay back any benefits you have received since starting the program. That includes, per The Motley Fool:
- Retirement benefits you’ve received from Social Security.
- Any other benefits paid based on your work record, such as spousal benefits.
- Money that was withheld from your checks, such as Medicare Part B, C, or D premiums or any taxes you chose to have withheld.
So while withdrawing benefits is an option, it may take a little extra planning to make sure you can cover all of the costs.
Claiming Social Security early can help you deal with a tough economic situation like the one facing many Americans right now. It may seem like a drastic move, but it can work if you craft your retirement plan around it.
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