The Social Security program paid more than $900 billion to recipients in 2016. If your goals include attaining financial security in retirement in part via Social Security income, you'll need to decide when to start collecting benefits. Here are three reasons why you might want to start collecting early.
First, though, what's early? Well, if you have paid enough into the Social Security system, which typically involves having worked for 10 years, you are entitled to retirement benefits. You can begin collecting them as early as age 62 or as late as age 70, and each of us has a "full" retirement age, at which we can expect to receive our full benefits. (For most working folks these days, that's 66 or 67.) Start collecting earlier than your full retirement age and your benefit checks will be smaller -- delay until age 70 and they'll be bigger.
Reason No. 1 to claim Social Security early: You need the money
The best reason to start receiving your Social Security benefits early is simply because you need that income. Life rarely unfolds just as we expect it to. You might be socking money away and planning to retire at age 65 or 67, but you might unexpectedly lose your job at age 62. You might be planning to work until you're 70, but health setbacks might force you to leave the workforce years before that. According to the 2016 Retirement Confidence Survey of the Employee Benefit Research Institute, 46% of retirees left the workforce earlier than planned, with 55% citing health problems or a disability as the reason and 24% citing changes at work such as a downsizing or workplace closure.
The same study also reveals another reason you might be financially pinched: Fully 26% of survey respondents had less than $1,000 saved for retirement and 64% had less than $50,000. Clearly, neither sum is anywhere near enough to support anyone for multiple years of retirement, and additional funding will be necessary. Fortunately, there's Social Security.
Reason No. 2 to claim Social Security early: It's a wash
Another reason to start collecting your benefits early seems very solid: The longer you wait, until age 70, the bigger your checks will be. For every year beyond your full retirement age that you delay, your benefits will increase in value by about 8% -- up to age 70. So delay from 67 to 70 and you can make your checks fully 24% bigger. If you were expecting to collect $2,000 per month ($24,000 per year), you can instead receive $2,480 per month (or nearly $30,000 annually).
Actually, though, the reason shouldn't be quite so compelling. As the Social Security Administration has explained, "If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between." It makes sense once you think about it: If you delay starting to collect from age 67 to age 70, you will miss out on three years' worth of payments -- that's 36 payments.
Delaying starting to collect can make sense in some cases, of course, such as if you can and want to work longer than you have to, or if your family features very long life spans, in which case you can come out ahead by collecting bigger checks for a longer than average time.
For many, if not most, folks, though, starting to collect early is a perfectly reasonable thing to do.
Reason No. 3 to claim Social Security early: Because you can
Finally, the last good reason to claim your Social Security benefits early is if you can. If you have enough money saved that your reduced benefits will be sufficient, consider starting early. If your family features many people who lived shorter-than-average lives and you can get by on the smaller checks, go ahead and start collecting Social Security as early as you can.
You might also be able to collect early if you're married and your spouse is older and/or has a record of significantly higher earnings. In such a situation, you might employ a spousal strategy where you start collecting your benefits early while your spouse puts off starting to collect, letting those benefits grow larger. (A morbid additional plus is that if he or she predeceases you, as a survivor you'll be able to collect his or her larger benefits instead of your own smaller ones.)
Starting to collect Social Security will offer you more than just income. Those benefits can make it possible for you to retire early and begin to enjoy more carefree days. You might finally tackle some goals you've had for a long time, such as traveling in Europe, learning woodworking, or expanding your garden. Few of us know how long we have to live, so it's smart to make the most of the time we have.
The average monthly Social Security retirement benefit was recently about $1,355, or $16,260 for the year, and the maximum monthly benefit for those retiring at their full retirement age was recently $2,639, or about $32,000 annually. Those are not huge sums, so be sure to explore Social Security strategies to see how you might make the most of the program.