There's a reason more seniors claim Social Security at 62 than at any other age -- it's the earliest point at which you're allowed to access those benefits. There's just one problem with going this route. For each year you file for Social Security ahead of your full retirement age, you'll reduce your benefits so that you wind up with less income from the program each month. For example, if your full retirement age is 67 (which is the case if you were born in 1960 or later) and your full monthly benefit amount is $1,500, you'll lower that figure to $1,050 by filing at 62.
That said, there are certain circumstances under which it pays to take that hit on benefits and gain access to your money sooner. Here are a few reasons why filing for Social Security at 62 makes sense.
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1. You were forced to retire sooner than planned
Most of us picture ourselves leaving the workforce at our own pace. But you may not get the option to work as long as you'd think. In fact, an estimated 60% of seniors wind up forced into early retirement, and the reasons run the gamut from health issues to layoffs. If that's the case, and you don't have enough savings to cover your living expenses, then you might as well file for benefits and get access to the cash you need. Otherwise, you'll risk racking up costly credit card debt or resorting to other such extreme measures at a time in your life when you'll likely struggle to recover.
2. Your spouse has benefits he or she can wait on
Maybe you need extra money at present, or just plain want some additional income to pay for leisure activities you can enjoy while you're younger. The problem with taking Social Security at 62, as we just learned, is that you'll face a reduction in benefits. But if you have a spouse who's entitled to benefits based on his or her work record as well, you may not end up taking such a bad hit overall by filing early. That's because while you claim benefits at 62, your spouse has the option to delay benefits past full retirement age, thereby increasing them by 8% a year up until age 70.
Imagine you're entitled to $1,500 a month at 67, only you pull the trigger on Social Security at 62. You'll lose $450 a month in benefits that you could come to miss later in life. However, if your spouse is entitled to a $1,500 benefit at 67 but waits until 70 to file, he or she will boost that monthly sum to $1,860. Suddenly, your $450 hit is offset by a $360 increase, and you'll have had access to your own benefits all along.
3. It won't really hurt you financially
The only reason not to claim Social Security early is to avoid a reduction in benefits. But filing at 62 may not cause you to lose out financially in the long run. That's because Social Security is designed to pay you the same lifetime benefit regardless of when you initially file. The logic is that while filing at 62 will slash your payments, you'll also collect more payments in your lifetime. Therefore, if you live an average life expectancy, you'll probably come out with roughly the same amount of money regardless of whether you file at 62 or whether you wait until full retirement age.
Let's go back to our example: You're entitled to $1,500 a month at age 67, which gets reduced to $1,050 if you file at 62. If you live until just over 78 1/2, you'll end up collecting around $210,000 in either scenario. In fact, if you pass away sooner, you'll come out ahead by filing at an earlier age. Therefore, if you have a good reason to take those benefits at 62, you might as well go for it, since chances are, you'll break even in the end.
Of course, there are certain scenarios in which filing for Social Security at 62 is a bad move. If you're low on savings, are still working, and don't need the money right away, then you might as well grow that benefit so that you have more income available once you retire. Granted, you might break even as per the above scenario, but if you wind up living a longer life than expected, you'll come out ahead by waiting. On the other hand, filing for benefits as early as possible isn't necessarily the irresponsible idea many folks make it out to be, so if you decide that 62 is the right age for you to claim Social Security, don't sweat it too much.
