There's a reason 62 is the most popular age for workers to start collecting Social Security -- it's the earliest possible age to take benefits. The problem, of course, is that filing for Social Security at age 62 means slashing your benefits for life. Any time you claim benefits prior to reaching full retirement age, you lose out on a percentage of the payments you'd otherwise be entitled to by waiting. And if you're counting on Social Security to pay the bills in retirement, filing early could put you at a severe disadvantage.
On the other hand, there are certain scenarios where it's actually a good idea to file for Social Security at 62. Here are a few examples.
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1. You've lost your job
Maybe your original plan was to work until 66 or 67 to collect your Social Security benefits in full. But if you're 62 and suddenly find yourself out of a job, it might pay to jump on those benefits -- especially if you don't have enough savings to cover your living costs. Though you will face a reduction in payments by filing before full retirement age, it's a far better bet than racking up costly credit debt to keep up with your expenses.
Furthermore, you should know that as an older worker, you're statistically more likely to have difficulty becoming reemployed than someone younger. After the 2008-2009 recession, for example, workers 55 and over who lost their jobs remained unemployed for 40.6 weeks, on average, compared to just 31.6 weeks for younger job searchers. It's also not unheard of for older workers to experience age discrimination during the interview process. What all of this means is that if you find yourself out of work at 62, it may be some time before you're able to collect a salary again. And if that's the case, then it pays to snag your benefits if you need them.
2. You have health issues
The interesting thing about Social Security is that it's designed to pay you the same amount in lifetime benefits regardless of when you first file. That formula, however, assumes that you live an average life expectancy. But if you pass away sooner than expected, you could end up losing out by waiting to file. That's why if your health is poor, and you don't expect to live a long life, it pays to start taking benefits as early as possible.
Imagine your full retirement age is 67, at which point you're eligible for $1,500 a month in benefits. If you were to file for Social Security at age 62, you'd cut your payments down to $1,050 apiece, but you'd also collect more of them. Now if you end up living until age 78.5, you'll wind up with roughly the same lifetime benefit under either scenario. But if you pass away at age 72, you'll come out $36,000 ahead by filing for benefits at 62 rather than waiting until full retirement age.
Though it's never pleasant to think about your own mortality, it should be a factor in determining the right age to file for Social Security. And if your health outlook isn't great, then it pays to take benefits the moment you're eligible.
3. You're way ahead of the savings game
Most older workers happen to be behind on retirement savings. But if you're among the elite few who have more than enough savings to live off, then you may want to start collecting benefits earlier on, even if that does mean lowering your payments. That's because the younger you are, the more likely you are to be in good enough physical shape to make that most of that extra cash, whether you use it to travel, pursue your hobbies, or enjoy the local nightlife scene. Countless seniors rely on Social Security to stay afloat in retirement, but if you don't actually need the money, you might as well collect it when you can enjoy it the most.
Though many older workers are encouraged to hold off on Social Security for as long as possible, clearly, there are certain situations where filing for benefits at 62 makes sense. If one the above scenarios applies to you, consider pulling the trigger and collecting your benefits as early as possible. It could end up being one of the smartest retirement moves you'll ever make.
