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Should I Take a Reduced Annuity at 62?
(Posted January 6, 2015)
Question 1231: My husband receives a Railroad Retirement disability pension. I was told by the RRB that, as his wife, I could begin collecting a Railroad Retirement benefit at age 62, so I did. I was working for a school system and now I am starting to collect a public service pension. I was told I will lose almost all of the Tier 1 part of my benefit. Should I have waited until I became age 66?
Answer: This situation is one of the most difficult to give advice on. No one knows how long a person will live unless they have been diagnosed with a fatal disease. If you take a reduced annuity at 62 you will receive around 75% of what you would receive if you had waited until your full retirement age.
I advise people in this situation to take the reduced annuity if you have retired and you don't plan to work in the future. Of course, if you live more than 12 years, you will receive less total benefits than if you waited until your full retirement age.
Recent actuarial figures show that the average life expectancy of a rail worker at 62 is 241 months or 82.1 years. At 66, it's 212 months or 82.7 years. If the annuity rate is $1,000, the total amount paid is for an unreduced annuity is $212,000 compared to $180,750 for a reduced annuity.
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