The earliest age you can claim Social Security benefits is 62 -- and 62 is also the most popular age to claim benefits, according to the Center for Retirement Research. If you're thinking of starting your benefits ASAP once you become eligible, you should carefully consider the pros and cons of this claiming strategy before you make your final choice.
Pros of Claiming Social Security at 62
There are plenty of advantages to taking the money as soon as you hit the age of 62. Some of them include:
- You can keep your savings invested for longer: If you want to retire early, you'll need to start drawing from your savings or collecting Social Security benefits -- or both. If you're retiring during a market downturn, you may want to keep your money invested longer so the market can recover. You also may be getting a good return on your investment and want your nest egg to grow. If your hope is not to touch your savings, claiming Social Security at 62 can give you the money to live on until you're ready to begin withdrawals.
- Claiming early can make early retirement possible: For many people with too little savings, Social Security income is necessary to live on. If you can't find work and you're 62, you may have no choice but to start claiming Social Security so you can support yourself. Voluntarily leaving the workforce early can also have health benefits, so if claiming Social Security makes the difference between fulfilling your early retirement dreams or being stuck in a job you don't want to keep, claiming early makes sense to improve your quality of life.
- You can enjoy the money while you're still healthy: One in three retirees responding to a Nationwide survey said health issues were interfering with their retirement. If you want to claim Social Security benefits while you're young and healthy so you have the money to travel while you can, claiming at 62 makes sense. However, you'll need a plan to pay for healthcare at the end of your life. Retirees tend to spend a lot during early retirement enjoying life, less during the middle of retirement, and a fortune on healthcare at the end.
- You can claim before the value of the benefit erodes: Social Security benefits aren't really keeping pace with the rising cost of living. Because Social Security raises are calculated based on increases in costs for urban wage earners and clerical workers, benefit increases don't accurately account for the fact that seniors spend disproportionately on housing and healthcare. As a result, Social Security increases don't give seniors much more buying power, since extra money is lost to higher Medicare premiums, as well as medication and housing costs. With the value of benefits slowly eroding, claiming as early as possible could be smart.
- You won't die before you can break even after delaying benefits: If you delay Social Security benefits, you'll get a higher monthly income when you finally do claim -- but you'll have months or years when you received nothing at all. It can take a long time to break even for missed benefits -- 11.7 years if you retire at 62, based on calculations with average benefits. There's no guarantee you'll live longer than 78.7 years. If you don't, you'll have missed out on money by waiting to claim.
There's also an argument to be made that you're better off claiming Social Security benefits ASAP because the future of the program is uncertain. However, while the Social Security trust fund is scheduled to run out of money in 2034 -- which would mean there'd be only enough cash to pay 77% of benefits -- it's unlikely Congress will allow such a big cut.
Still, if you're eligible and you worry about the long-term viability of the program, you may want to get the money while the going's good.
Cons of claiming Social Security at 62
While claiming Social Security at 62 may sound good, the biggest disadvantage is you'll get a significantly reduced benefit. Your standard benefit is based on your full retirement age (FRA), which is 67 if you were born after 1960. For each month you claim early, your benefit is reduced by 5/9 of 1%. If you claim more than 36 months early -- which you will if you start getting Social Security at 62 when FRA is 67 -- you'll face an additional 5/12 of 1% monthly reduction.
This means if you would've received the average benefit of $1,404 at 67, you instead will receive just $983 per month. This benefit reduction is a permanent one unless you take certain steps to undo your early claim. Unfortunately, benefits don't go up when you turn 67, as close to 40% of retirees mistakenly believe.
Social Security benefits provide guaranteed income for life, which your retirement savings doesn't do since there are no guarantees your savings will last. Stanford experts believe Social Security is the ideal retirement vehicle and urge you wait until age 70 to begin claiming benefits so you can get the most money possible.
If you've claimed benefits early, your guaranteed source of retirement income will be far lower than it otherwise might be -- which could leave you struggling if you end up needing to rely on Social Security to provide some or all of your income.
When should you claim Social Security benefits?
Ultimately, every person needs to decide when the optimum time is to claim Social Security benefits. While claiming early makes sense under certain circumstances -- you need the money or don't think you'll live long -- longer average lifespans mean you might have decades to collect Social Security. If you live a long time and want to maximize your income, waiting to claim benefits can make a lot of sense.
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