Claiming Social Security at 62 is popular because it's the youngest age when you can get your hands on your retirement benefits. But just because the Social Security Administration allows you to get your benefits in your early 60s doesn't mean it's not smart to wait -- at least until full retirement age and possibly until age 70.
Delaying your claim for benefits gives you the chance to boost the Social Security income you'll receive for the rest of your life, so it's worth seriously considering. After giving the matter careful thought, you may decide it's smart to claim benefits at 62 even if this reduces your benefits. But if you claim early, you want to do so for the right reasons. However, far too many people start receiving Social Security at 62 for awful reasons, such as the ones we'll discuss here.
1. Because you believe the rumors about Social Security
Social Security is going broke. That's a persistent rumor that's left more than half of all Americans thinking they won't receive any Social Security benefits.
The problem is, the rumor isn't true. While the Social Security trust fund is slated to run out of money in 2034, chances are changes will be made to the program before then. And, even in a worst-case scenario, Social Security will still pay around three-quarters of promised benefits if the trust fund goes broke. That's because much of Social Security's funding comes from payroll taxes collected from current workers.
So don't buy into the hype and claim Social Security benefits ASAP in the hopes you can get some money before benefits run out. You're going to get your benefits even if you wait until age 70 to claim them, because Social Security won't go bankrupt.
2. Because you think Social Security can boost your salary
If you want some extra cash while working, you may think you can get it by claiming Social Security at 62. However, trying to use Social Security benefits to supplement your salary isn't likely to be very successful. That's because your Social Security benefits are reduced if you earn too much from working and you're below full retirement age -- which you would be at 62.
When you're younger than full retirement age for the full year, Social Security deducts $1 from your benefits for each $2 you earn above the annual limit. The annual limit changes periodically but is $17,040 in 2018. Because of this limitation, you won't be able to bring in much -- if any -- money from Social Security at 62 while still earning a living.
Say, for example, you'd receive around $1,200 monthly in Social Security benefits at age 62. You claim benefits to supplement a salary of $45,000. Your $45,000 salary is $27,960 above the $17,040 limit. You lose $1 for each $2 earned above that amount, so you lose $13,980 of your $14,400 in annual Social Security income. You'd end up with just $420. While your benefits go up later to make up for the reduction in benefits resulting from working, it's not worth claiming early to get almost no money.
3. Because injury or illness forces you out of work
If you can't work any more because of a physical disability, you may feel forced into claiming Social Security at 62 because you need income to live on. But you shouldn't rush to claim Social Security retirement benefits, which causes you to permanently reduce the benefits you receive for the rest of your life.
Instead, consider applying for Social Security Disability Insurance. It's often easier to get approved for SSDI benefits when you're older than when you're younger, and you won't experience the reduction in benefits that comes from applying for retirement benefits early. You can also become eligible for a "disability freeze." A disability freeze helps you because Social Security calculates benefits based on average wages. If you're disabled and making very little because of it, a disability freeze prevents this low-earning year from being counted when determining your monthly benefit.
Social Security Disability benefits automatically switch to retirement benefits when you reach full retirement age -- but the amount you'll get will be higher since you didn't claim early. This is a far better outcome.
Don't make a mistake when it comes to Social Security
If you claim Social Security benefits at 62, the permanent reduction in benefits that comes from claiming early could threaten your future financial security. Think the decision through carefully, and make sure you understand how Social Security benefits work, so you can make the right choice for you.
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