You can start to take Social Security retirement benefits anytime between ages 62 and 70, and different circumstances dictate when it makes the most sense to apply. Importantly, the size of your monthly benefit depends on when you start taking it. For those born after 1959, full retirement age is 67. If you take retirement at 62, your benefit will be 30% less each month. On the other hand, waiting to age 70 would give you a 30% higher monthly payment.
With a few exceptions, it just doesn't make sense to take Social Security retirement at 62 -- frankly it can be downright dumb. We asked three of our top contributors to give us a few reasons why. Here's what they had to say:
Dan Caplinger (It's not just your monthly benefit that's affected): One of the most overlooked reasons why taking your Social Security benefits at age 62 isn't the best strategy involves survivors' benefits for your family members. As Selena and Jason point out below, claiming early reduces the monthly check that you receive from Social Security, but many people justify that choice by noting that they get a larger number of total checks, offsetting the negative impact of smaller payments. Yet when you claim your own benefits early, you also set the amount that your spouse and other eligible family members will receive in survivors' benefits after your death.
Although Social Security argues that the reduction in monthly payments accounts for the retiree's life expectancy, it can't take into account the impact on what a spouse might receive in survivors' benefits. Accordingly, even if claiming early might make sense given your health and life expectancy, it might still be the wrong decision if your loved ones are likely to collect benefits based on your work record for a lot longer into the future. Be sure to consider their needs as well as your own before you make a decision your family might regret -- they'll appreciate it when the time comes and they need Social Security's financial support the most.
Selena Maranjian (You're passing up bigger checks by claiming so early): Should you start collecting Social Security as early as possible at age 62, as late as possible at age 70 when you'd receive the biggest check, or at some point in between? There's a decent case for starting at age 62. After all, per the Social Security Administration itself: "If you live to the average life expectancy for someone your age, you'll receive about the same amount in lifetime benefits. It doesn't matter if you choose to start receiving benefits at age 62,full retirement age, age 70, or any age between."
The reason it won't make a difference is because though checks that start at age 62 will be significantly smaller than ones that begin years later, there will be a lot more of them -- 96 more of them. Still, note this little phrase in the SSA explanation: "If you live to the average life expectancy for someone your age..." Few of us will live to our average life expectancy. Most of us will live lives shorter or longer than that.
Thus, one reason to delay starting to collect Social Security, if you can, is to get bigger checks. And that can make a lot of sense if you expect to live a long time. There's typically no way for us to know how long we're going to live, but if your grandparents all lived into their 90s and you're in good health, then you stand a good chance of living a long time, too. In that case, your total lifetime benefits will be bigger if you can delay starting to collect rather than starting at age 62.
Jason Hall (That smaller benefit may hurt you later in life): As Selena points out, your monthly benefit goes up the longer you delay taking retirement. And proponents of claiming early point to the fact that you get more checks the sooner you claim, which would be worth more money before turning 70.
Unfortunately, this would mean a lot less money if you live into your 80s (and a lot more people will). Factor in the paltry retirement savings the average person has accumulated, and a 30% lower benefit could lead to hard times late in life, when you're most in need and least able to work. According to Vanguard's most recent "How America Saves" report, the median retirement account balance for accounts it manages was $76,618 for those between 55 and 64 in 2014.
That's only worth about $3,000 per year in sustainable retirement income, far from enough to bridge the gap in reduced Social Security for most people.
Bottom line? Taking your benefit early may be nice for a few years, but it could hurt you and your loved ones a lot when it matters most: late in life.
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