There is a reason that seniors are usually advised against claiming Social Security too early. Claiming early could result in a decreased income stream for life.
You are entitled to your entire monthly benefit amount based on what you earned during your lifetime once you get to full retirement age (FRA). FRA begins at either 66 or 67, or somewhere in between the two, depending on when you were born.
If you were to claim benefits at the earliest possible age of 62, you would cut your monthly benefit amount by up to 30%. And do not be fooled into believing your benefit will then be increased to its full amount once you hit FRA, because that is not going to happen. Instead, you will generally be stuck with a lower benefit amount for life.
In spite of that, claiming SS at age 62 could actually make a lot of sense. This especially is true if the following scenarios apply to you.
1. Your career has ended unexpectedly
It is one thing to stay employed until FRA and claim SS then. But if you are forced to make a surprise exit from the workforce, you might have to sign up for SS early. If you do not, you could rack up costly debt just to live.
Why could you have to retire earlier than planned? There are a lot of reasons. You might start having health problems that make it difficult to work a full-time job. Or, you may get downsized out of your job and have a hard time finding another job at your age.
As such, you may have to claim Social Security benefits as an alternative to getting into credit card debt. And to be clear, that is the smarter route to take.
2. You’re not super confident in your health
Social Security is actually created to pay you the same benefit amount during your lifetime regardless of what age you file. The logic is that if you sign up early for benefits it will give you smaller payments every month, but more months of payments, while claiming benefits later will do the opposite.
This assumption is only true, however, if you live an avg. lifespan. And so, if health issues arise as retirement draws near, it could pay to claim your benefits as soon as you can if you are worried you won’t live an average or long lifespan. Doing so might make it so you are able to additional money out of Social Security during your lifetime, which is what your goal should ultimately be.
3. You’ve saved so much your benefits are really just bonus cash
If you are coming into retirement with about $90,000 in your 401(k) or IRA plan, then let’s face — you are going to need all the cash you can get out of SS to cover your living casts as a senior. But if you are entering retirement with $4 million in your bank account, then it probably does not matter whether you collect $1,200 each month from SS, $2,000 each month, or somewhere in between.
In that scenario, the chances are, you will be receiving most of your senior income from IRA or 401(k) withdrawals. And so if you want to claim SS early and use that cash for things like leisure purchases and vacations, why not do it?
Though claiming SS at age 62 will leave you with less money coming in every month — for life — it is not necessarily a terrible idea. Quite the contrary — it might end up being one of the best moves you will make for your retirement.