I can't live on Social Security Benefits due at 62

How can I afford to retire now?

I will be 62 soon, but I am a minimum wage earner. Never earned much more than minimum wage. I take home about $1,100 after deductions for FICA/Medicare and health insurance. My Social Security will be only $815 if I retire at 62 and I barely pay my bills as it is. I have no retirement savings. I see no way I can retire at 62. Please advise. Won't I need to wait until I get the maximum benefit to retire?


There is good news and there is bad news. You probably cannot afford to retire at 62 if you need $1,100 a month to pay basic living expenses. So you keep working. Now for the good news - working does not bar you from drawing Social Security benefits starting at 62.


According to WWW.SSA.GOV here is how it works:

　"How earnings affect your benefits:

You can continue to work and still get Social Security retirement benefits. Your earnings in (and after) the month you reach your full retirement age will not affect your Social Security benefits. However, your benefits will be reduced if your earnings exceed certain limits for the months before you reach your full retirement age. (The full retirement age is 66 for people born in 1943-1954 and will gradually increase to 67 for people born in 1960 or later.)

If you are younger than full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit ($14,160 in 2010).

In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn over a different limit ($37,680 in 2010) until the month you reach full retirement age. Then you get your full Social Security benefit payments, no matter how much you earn.

If you are younger than full retirement age and some of your benefits are withheld because your earnings are more than $14,160, there is some good news. When you reach full retirement age, your benefits will be increased to take into account those months in which you received no benefit or reduced benefits.

Also, any wages you earn after signing up for Social Security may increase your overall average earnings, and your benefit probably will increase."

The Analysis:

So you can receive benefits and work. In general the minimum wage is $7.25 an hour. A work year is about 2080 hours - so your earnings are around $15,080 a year. You are allowed to earn $14,160 with no reduction in benefits. So you will exceed that by $960. This will result in a decrease in your benefits of $480 a year (or $40 a month on average). So you continue bringing home $1,100 a month from work and get around $775 in benefits each month.

Finally you may be able to save something to fund retirement for that day when you are no longer able to work if you manage your finances carefully. If you are married and your wife is of age she may also receive benefits (spousal benefits if she has no work history).

Taking benefits at 62 may reduce your benefits somewhat at full retirement age around 66 (maximum benefits at age 70), but since you continue to contribute to FICA by working the hit will not be as substantial as might seem since benefits will be adjusted upwards based on your continued contributions.

So to answer your question - should you wait until you can receive maximum benefits to start receiving Social Security benefits. Absolutely not. Apply for benefits as soon as possible and continue working. Handle the extra money carefully and save some for when you finally do quit work. If you don't start and die before you could draw maximum benefits - the money evaporates (it is gone). If it is in your bank account at least your spouse or children can benefit from it. 


I can think of no reason for you to wait. The fact you have no retirement savings is a good reason to start receiving benefits as soon as possible. Of course for others earning more (say $10-12 an hour) the analysis may differ and you probably should talk to an advisor and run the numbers. . .