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3 Awful Reasons to Take Social Security Benefits at 62

Because Social Security eligibility kicks in at age 62, many seniors rush to claim benefits as early as possible. But there's a downside to filing at 62: reducing your benefits by taking them ahead of full retirement age (FRA).

For today's workers, FRA is either 66, 67, or 66 and a certain number of months -- it all depends on your year of birth. Either way, filing at 62 means taking benefits early and reducing them in the process.

What sort of reduction are we talking about? If you're looking at an FRA of 67, filing at 62 will slash your benefits by 30%. And unless you happen to undo your application in time, once you lock in that lower benefit, it'll remain in effect for the rest of your life.

Now there are certain circumstances under which claiming benefits at 62 makes sense. But these three reasons for filing early just don't.

How Much Do You Need to Earn to Max Out Your Social Security Benefit?

The maximum Social Security benefit for a new retiree in 2018 is north of $33,000 per year at full retirement age and can be even higher for workers who wait. So how much do you need to earn if you want the maximum Social Security benefit when you retire?

Unfortunately, this question is more complicated than it may seem. Here's a rundown of how much you can get from Social Security, how much you'll need to have earned to get the maximum benefit, and how the maximum benefit amount could change in the future.

Every retiree should make this tax move right now, according to the IRS

The IRS has a message for retirees: make sure you’re paying enough federal income tax. The Tax Cuts and Jobs Act of last December changed the income tax calculations for most filers, and employees aren’t the only ones who need to double check they’re withholding the right amount.

The GOP tax bill lowered the top individual rate to 37% from 39.6%, and the income brackets dropped slightly -– by about 3%, says Chris Baker, a certified financial planner at Oaktree Financial Advisors in Carmel, Indiana. This means that on average most retirees will likely see a decrease in tax liability and owe slightly less, although it varies by individual circumstances, he says.

Retirees who receive monthly pension income or annuity checks may well need to increase or lower the amount of taxes they pay. While most retirees prefer withholding taxes from each paycheck to give Uncle Sam his due, those who choose to receive the full amount in each check and then make estimated payments to the IRS must do so four times a year by the quarterly deadlines. The third quarter deadline was Sept. 17, and the next is Jan. 15, 2019.

Withholding too much from each check could result in an outsized refund while withholding too little could mean you owe the IRS next spring. “Make sure you don’t have a large balance due because it’s possible you could be penalized for underpaying your estimated tax,” says April Walker, lead manager for tax practice and ethics at the American Institute of CPAs.

Retirees with Pension Income should do a Paycheck Checkup ASAP

Retirees should do a Paycheck Checkup to make sure they are paying  enough tax during the year by using the Withholding Calculator, available on IRS.gov. The Tax Cuts and Jobs Act, enacted in December 2017, changed the way tax is calculated for most taxpayers, including retirees.

Because of this law change, retirees who receive a monthly pension or annuity check may need to raise or lower the amount of tax they pay in during the year. The easiest way to do that is to use the Withholding Calculator or readPublication 505, Tax Withholding and Estimated Tax. Though primarily designed for employees who receive wages, this online tool can also help those who receive pension or annuity payments on a regular schedule, usually monthly or quarterly.

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