Social Security: 5 Great Reasons to File for Benefits at 62

More Americans claim Social Security at age 62 than at any other age, even though doing so results in a significant benefit reduction. In fact, 42% of men and 48% of women choose to start collecting Social Security as early as possible.

Despite the drawbacks of filing for Social Security benefits several years before reaching full retirement age, there are some good reasons for doing so. Here's how claiming Social Security at 62 could affect you, and five reasons it could be a smart move.

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Social Security at 62: What you need to know

Depending on the year you were born in, your Social Security full retirement age can be as early as 66 or as late as 67. However, you can claim your retirement benefit as early as age 62 or as late as age 70. Your primary insurance amount, or PIA, is the full Social Security benefit you would be entitled to if you claimed at full retirement age.

If you choose to claim your retirement benefit early, it will be permanently reduced by a percentage that depends on your full retirement age, and the age at which you decide to file for benefits. Specifically:

• Your retirement benefit will be reduced by 6.67% per year (0.56% per month) for up to 36 months before reaching full retirement age.
• Your benefit will be further reduced by 5% per year (0.42% per month) beyond 36 months before reaching full retirement age, until as early as age 62.

The effect of these reduction rules means that your retirement benefit at age 62 will be significantly reduced, depending on the year in which you were born:

Data sources: Social Security Administration and author's own calculations.

Now for those five reasons you may want to file early anyway.

1. You plan to retire early

Early retirement is a goal of many Americans, and if you have enough retirement savings to justify leaving the workforce in your early 60s or before, it can certainly make sense to claim Social Security as soon as possible. Doing so can allow you to avoid tapping into your nest egg too much early on in your retired life.

2. You can't keep working anymore or can only work part-time

Not everyone who retires early planned to do so. One recent study by Voya Financial found that 60% of retired workers left their jobs before they expected to, because of reasons such as layoffs or health concerns. In addition, some workers are forced to cut their hours back to part-time status because of physical limitations. Even if you're still working part-time, you could be entitled to a full or slightly reduced Social Security benefit, and this additional income may be necessary to make ends meet.

3. You need the money

This is perhaps the most obvious-sounding reason on the list, but it's still an important one. Even if you plan to retire or stop working full-time early, in many cases it could still be a smart idea to wait to claim Social Security if you have other retirement accounts to draw income from, such as a 401(k) or IRA. Unlike these accounts, Social Security is inflation-protected, so it can be a smart strategy to maximize your initial benefit and your future income stream.

However, keep in mind that the average 401(k) balance for Americans ages 55-64 is $177,805, according to Vanguard's "How America Saves" report. That may sound like a lot, but it may not be enough to allow the average American to wait to collect Social Security, and even if it is, it's not a good idea to completely exhaust your other retirement savings before collecting Social Security.

In a nutshell, if you have limited retirement savings, it can be a good reason to claim Social Security at 62.

4. You are in poor health or don't expect to outlive the average American

Social Security is designed so that the average beneficiary will receive roughly the same amount of inflation-adjusted Social Security retirement benefits throughout his or her lifetime, regardless of the age at which one decides to claim.

However, remember that you are not necessarily the average American, and this doesn't take your personal situation into account. So if you are in relatively poor health or have good reason to suspect that your life expectancy isn't as long as the average American retiree, it could be a smart idea to file for Social Security benefits early.

5. Your spouse is older than you and expects to collect a spousal benefit

Here's a reason to claim early that you might not be aware of. Social Security spousal benefits are intended to provide retirement income to married (or divorced) individuals who either didn't work, or whose benefits are disproportionately smaller than the primary-earning spouse. Depending on the situation, a spousal benefit can be up to half as large as the primary earner's full retirement benefit.

To make a long story short, while regular Social Security retirement benefits continue to grow if you wait until after full retirement age to claim, there is no such provision when it comes to spousal benefits. In other words, spousal benefits can be reduced if they're claimed before the beneficiary reaches full retirement age, but there's no financial incentive to wait longer than full retirement age. Also, the rules state that a spousal benefit cannot be awarded until the higher-earning spouse files for his or her own retirement benefit.

For this reason, if you were the higher earner, and you're significantly younger than your spouse, it can be a good idea to claim your Social Security benefit before your spouse reaches full retirement age. If your spouse will have already reached full retirement age before you reach 62, it can certainly make sense to claim as soon as possible to maximize your total lifetime Social Security benefits.