Taking Social Security benefits early at age 62 or waiting until age 70 both have their pros and cons. Deciding which option is best for an individual depends on their individual circumstances and financial goals.
Pros of taking Social Security early at age 62:
- Access to benefits: The main advantage of taking Social Security early is that the individual can start receiving benefits sooner. This can be useful for those who need the money to cover living expenses, pay off debt, or for other purposes.
- Longer benefit period: Taking Social Security early provides a longer period of time for receiving benefits, which can be particularly important for those with shorter life expectancies.
Cons of taking Social Security early at age 62:
- Reduced benefits: The biggest drawback of taking Social Security early is that the benefits are reduced compared to waiting until a later age. For each year that the individual waits to take benefits beyond age 62, the benefit amount increases by about 8%.
- Reduced income potential: Taking Social Security early reduces the potential income the individual could receive over their lifetime, as the reduced benefits will be received for a longer period of time.
Pros of waiting until age 70 to take Social Security:
- Increased benefits: The main advantage of waiting until age 70 to take Social Security is that the benefits are significantly higher than if taken at age 62.
- Increased income potential: Waiting until age 70 to take Social Security can increase the individual’s potential income over their lifetime, as they will receive higher benefits for a shorter period of time.
Cons of waiting until age 70 to take Social Security:
- Reduced access to benefits: The biggest disadvantage of waiting until age 70 to take Social Security is that the individual will have a shorter period of time to receive benefits. This can be a concern for those with shorter life expectancies.
- Need for alternative income sources: Waiting until age 70 to take Social Security means that the individual will need to find alternative sources of income from age 62 to 70. This can be a challenge for those who do not have other sources of income or savings.
Using the proceeds of a reverse mortgage for income from age 62 to 70 can help address some of the cons of waiting until age 70 to take Social Security. However, it is important to consider the fees and other costs associated with a reverse mortgage, as well as the impact it may have on the individual’s estate.
In conclusion, the choice of when to take Social Security benefits is a personal one that depends on individual circumstances and financial goals. Taking benefits early at age 62 provides access to benefits sooner and a longer benefit period, but the benefits are reduced and the potential lifetime income is reduced. On the other hand, waiting until age 70 to take Social Security provides increased benefits and increased potential lifetime income, but reduced access to benefits and the need for alternative income sources during the interim. A reverse mortgage can be a useful tool to address the latter, but it is important to consider the associated fees and costs, as well as its impact on the individual’s estate. Seeking advice from a financial advisor or mortgage planner can help individuals decide if taking advantage of a reverse mortgage is right for them given their unique circumstances. Give us a call today to discuss whether a reverse mortgage makes sense for you.
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Carl Spiteri Branch Manager – Mortgage Advisor
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