How would you react if someone told you that you could have a whole bunch of money right now, or sit tight and wait a few years and get even more money in exchange? It's a dilemma seniors face all the time as they reach the age of eligibility for Social Security.
The earliest age to sign up for Social Security benefits is 62. But seniors aren't entitled to their full monthly benefit based on their respective earnings histories until full retirement age (FRA), which doesn't kick in until 66, 67, or somewhere in between, depending on a person's year of birth.
If you're entitled to a $2,000 monthly Social Security benefit at an FRA of 67, for example, filing at 62 means slashing that benefit to $1,400 -- for life. That's a large financial hit to take.
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But to be clear, that doesn't mean claiming Social Security at 62 is automatically a bad move. In fact, in these three situations, filing as early as possible actually makes a lot of sense.
1. You really, really hate your job
It's one thing to plug away at a job you can't stand when you're in your 20s or 30s and have the energy to deal with a nagging boss or a demanding work schedule. But once you reach your early 60s, your patience for that sort of arrangement might quickly wear thin. And if you've spent your entire life working, you really do deserve a break at some point.
Claiming Social Security at 62 could be your ticket to escaping the confines of a bad job and going out to find a new one. If you have that money from Social Security coming in, you might be able to manage a pay cut. That way, you'll have a chance to keep growing your retirement savings without having to be miserable day in, day out.
2. You have no choice but to leave your job
Maybe you don't hate your job at all. Maybe you love what you do and would stay at your company well into your 70s if the choice were yours. But if you're forced to leave your job, whether due to downsizing, health issues, or another reason, then claiming Social Security at 62 could be your ticket to staying afloat financially.
Filing for benefits early could also help you prevent a scenario where you're forced to replace a great job with a terrible job. It's an unfortunate fact that older job applicants often struggle to get hired due to perceptions about their outdated skills and impending retirement. And while it's very much illegal to not hire someone on the basis of age, it's also a hard thing to prove.
So, say your company has to cut its staff and now your only choice to continue working is to take a menial, dead-end role. Is that really something you should have to do in your 60s, after putting in decades in the workforce? If you claim Social Security at 62, you can potentially avoid that fate as you map out your next steps.
3. You've saved enough to file at any age you choose
The danger of claiming Social Security at 62 is slashing your benefits permanently and struggling financially in light of that. But what if you have maxed out your 401(k) for the past 30-plus years and were a savvy investor?
It could be that you're now sitting on millions of dollars as a result. And while you should still be careful when taking withdrawals, to make that money last, you might also be in position to claim Social Security whenever you want.
Though there's a clear downside to filing for Social Security at 62, there are numerous scenarios where that makes sense. Think about your circumstances to see if claiming benefits that early is a wise move for you.
