When you reach 62, you become eligible to claim Social Security benefits. But just because you can start getting them doesn't mean you should.
If you start your checks at 62, you'll shrink them considerably compared to the amount you could have received by starting later. In fact, thanks to early filing penalties, your benefits will be up to 30% smaller than the payment you'd have been eligible for at your full retirement age.
Since the income reduction is substantial if you opt for the earliest possible Social Security benefit, waiting is often the right financial move. But there's one particular situation where I would definitely opt to get my first payment at 62.
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Starting benefits at 62 would be the smartest move in this situation
Although I ideally want to wait until at least my full retirement age -- and probably until 70 -- in order to claim Social Security benefits, there's one circumstance that would cause me to change my plans and begin benefits at 62. I would start getting my payments ASAP if I'd otherwise need to begin making withdrawals from my investment accounts that were above a safe withdrawal rate.
I won't have a pension when I retire because I've never worked for an employer that offers a guaranteed lifetime benefit. And I'm not alone in this. Jobs with pensions are rare these days, especially in the private sector. So, like most people, my two sources of retirement income will be savings and Social Security.
Making sure my savings lasts will be a top priority. No one can comfortably live on Social Security alone, since these retirement benefits are designed to replace only around 40% of preretirement income. And to ensure my savings doesn't run dry, I plan to be conservative when deciding how much to take out of my accounts. Most likely, I'll aim to keep my retirement account distributions to around 3.5% of my balance.
If I couldn't stick to this withdrawal rate without Social Security to supplement my income, I would make the decision to claim retirement benefits at 62. And this is what many people should do if they're concerned about their savings running out, since you'd find yourself far worse off if you emptied your accounts just to try to increase your Social Security checks.
I'm making sure I don't find myself in this situation
While I would claim Social Security at 62 if I had to in order to avoid running short of retirement savings by relying too much on my investments, I don't want to do this. I'd rather wait to get a bigger check later in life. And I'd also prefer to delay my benefits claim because doing so gives me a better chance of getting more lifetime retirement benefits, since a slight majority of retirees end up better off by waiting.
In order to make sure I can afford to put off my benefits claim, I've set a savings goal that would give me enough money in my investment accounts to comfortably support myself without Social Security for several years. I realize it's unlikely that I'll be able to work until 70 (when I want to begin my benefits), so I want to make sure the income my investment accounts produce will cover my costs to enable that delayed claim I'm hoping for.
Anyone who wants to put off starting benefits should likely do the same to avoid finding themselves forced into starting their checks sooner than planned.
