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4 Reasons to Claim Social Security as Early as Possible

By Sam Swenson, CFA, CPA – Dec 8, 2021 at 1:35AM

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Taking Social Security as soon as possible is a great idea -- for some.

The decision to take Social Security is a big one, regardless of your financial status. To that end, it's a great idea to carefully consider why you might want to claim your monthly retirement benefits as soon as possible. 

Here, we'll look at four circumstances in which taking Social Security earlier rather than later makes a lot of sense. 

1. You need (or want) the money

It's really that simple: If you need the money to cover your monthly expenses in retirement, the sooner you claim benefits, the better. While you can expect to receive about 30% less in monthly benefit payments than if you were to wait until full retirement age (FRA), you'll immediately begin receiving payments that can help cover short-term expenses. 

For any number of reasons -- including those involving your health -- working into your 60s may not be an option. At the same time, paying your regular expenses is a reality. If you're not sitting on a million-dollar investment portfolio, don't hesitate to claim benefits if you need (or want) them. 

Two older people look at laptop.

Image source: Getty Images.

2. You have questions about longevity

This requires an individual break-even analysis to fully calculate, but it doesn't make sense to wait to claim benefits if you're not expecting an above-average life span.

In one example, say you were to take Social Security at age 62 and receive $1,600 per month; also imagine that if you were to until age 67, you would receive $2,500 per month. Very generally speaking, you'd need to live until nearly age 80 to receive the same amount of money in both scenarios. Unless you actually live until your late 70s, you'll come out ahead by claiming benefits sooner.

If you have concerns about your longevity, taking Social Security as soon as you're eligible can be a smart choice. You'll want to start the stream of benefits at the earliest juncture possible, which is akin to cashing in your chips early to guarantee that you receive as much as you can during your 60s and early 70s. 

3. You don't plan to work in retirement

If the Great Resignation of 2021 is any indication, there has been a widespread reevaluation of work in terms of its place in everyday life. Even though it's understood you'll receive less money by claiming Social Security benefits early, you might be trading a higher paycheck for a greatly increased quality of life beginning in your early 60s. 

The benefits of working in retirement are many; increased engagement, increased flexibility, and continued social engagement are some common ones. But the truth remains: Working after age 62 simply isn't a reality for many people. Further, some people have decided that the value of more money can never replace time with grandchildren or spent on leisure activities. Sometimes, the financially optimal choice doesn't match with life as it happens in real time.  

4. You're concerned about the future of the SSA

It's not a death knell for benefit payments, but there is evidence that the Social Security Administration's (SSA) trust reserves are on a fast track to depletion by 2033. If the reserves were to run completely dry, payments would still continue, but it's possible that people will receive less money than they would if there were still a healthy reserve fund. 

Projections estimate that revenue from continued payroll taxes would be able to cover 76% of benefit payments, so you won't be left with no retirement income even if the trust reserves go to zero. What this does imply, however, is that the value of waiting to claim benefits may be lower than otherwise thought. If you can claim early and guarantee a steady stream of income, you might come out ahead if your FRA benefits aren't as "full" as you would have expected. 

Consider your timing

This isn't a recommendation to claim benefits early, but it is a reminder to start thinking about when it makes sense to claim them, given your specific circumstances. No two financial plans are exactly the same, so it's worth the time to sit down and carefully plan how you intend to cover your expenses in the early years of retirement. 

Retirement planning encompasses a lot more than money, so make sure to consider the nonfinancial puzzle pieces and weigh them appropriately. If you're having trouble making a decision, look for a fee-only financial planner to help in your analysis. 

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