When Smart People Take Social Security at 62
By: Dan Caplinger
Most people claim Social Security relatively early, with nearly half getting benefits at age 62. That isn't always the best decision, because taking early benefits results in your monthly checks being smaller. Yet there are some cases in which claiming your Social Security as early as possible truly is the smartest move. If the following situations apply to you, then you might want to look into the possibility of getting an early start on your Social Security benefits.
1. Your family is waiting on you so that they can claim spousal or children's benefits.
The elimination of the file-and-suspend rule has forced one-earner families into a dilemma: For an eligible spouse and children to claim benefits based on your work history, you now have to file for your own retirement benefits. Spousal benefits typically last throughout your spouse's lifetime, but children's benefits typically end when the child reaches age 18 or graduates from high school.
Sometimes, it will make more sense to file early and accept a smaller monthly payment for life if it means getting more in family benefits for your spouse, your children, or both. In particular, if you are retired but still have school-age children, or if your spouse will rely entirely on spousal benefits and has a below-average life expectancy, then the odds are highest that filing early will be smart.
2. You're a surviving spouse and have both retirement benefits of your own and potential survivor benefits.
Things get complicated with Social Security in situations in which a spouse has passed away. In that case, you might be entitled to retirement benefits based on your own work history as well as survivor benefits based on your spouse's work history. What many people don't realize is that you can make the decision to claim those benefits separately -- meaning that you can claim your own benefits first and then later claim your survivor benefits.
Depending on the size of your respective benefits, your best move might be to claim your own benefits as soon as possible but then wait to claim survivor benefits until they've grown to their maximum amount. That way, you get some income immediately, but you maximize your monthly payments later on when you need them most.
3. You will get a public pension that will reduce your Social Security benefits later.
Two provisions of Social Security can take away benefits for those who have worked in the public sector. Your spousal benefits can be reduced because of the Government Pension Offset, which is designed to prevent double-dipping both from a public pension program and from Social Security. Conversely, your own retirement benefits can get cut by the Windfall Elimination Provision, which can reduce Social Security benefits for those who split their career between private employment and public service.
Based on your financial situation, you should be able to anticipate what impact your public pension will have on the Social Security benefits you're entitled to receive. At some point, it might be smarter just to take whatever money you can between age 62 and whenever your public pension will kick in, because at least that way, you'll get something from Social Security before the Government Pension Offset or Windfall Elimination Provision take away part or all of your benefits going forward.
Because of the financial hit from taking Social Security early, it makes sense to think carefully before applying for benefits at age 62. However, in these situations, claiming at 62 can be the smartest move you can make.
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