The monthly benefit you collect from Social Security throughout retirement will hinge on how much you earn in the course of your career. But there's another factor that will determine how much you receive each month -- your filing age.
You're entitled to your full monthly benefit based on your wage history once you reach full retirement age (FRA), which is 66, 67, or somewhere in between, depending on when you were born. However, the Social Security Administration (SSA) will allow you to file for benefits as early as age 62.
Doing so has its benefits and drawbacks. The plus side? You get your money sooner. The downside? You slash your benefits in the process. In fact, if you're looking at an FRA of 67 and you file for Social Security at 62, your benefits will take a 30% hit.
But in spite of that, claiming Social Security at 62 makes sense in a lot of scenarios. Here are three great reasons to consider filing as early as possible.
1. You're out of work against your will
Many people wind up forced out of a job before they're ready to retire. If you've been downsized and can't find a new job, Social Security could help take the place of your regular paycheck. Furthermore, the coronavirus pandemic has forced a lot of seniors out of the workforce, whether due to layoffs or health concerns. And let's face it -- breaking back in when you're older is easier said than done. If you're able to compensate for not working by claiming benefits early, do so -- it's a better bet than racking up debt just to get by.
2. You're out of work temporarily and need money
Maybe you're not working right now to address a health issue or lay low until the pandemic is over, but you're confident you can get back out there in six months. In that case, claiming Social Security at 62 could be a smart move because you can actually use that money as a loan of sorts.
One lesser-known Social Security rule is that you're allowed to undo your filing once in your lifetime. If you claim benefits at 62 but are working again in a few months, you can withdraw your application, repay the SSA the benefits it paid you, and then file again at a later age so you don't slash your benefits in the process. The only catch is that you must undo your claim and repay your benefits within 12 months. But if you can pull that off, you can collect Social Security on a temporary basis without locking yourself into a lower monthly benefit forever.
3. You're tired of working and can get by on your Social Security paycheck
Maybe you have the option to work, but at this point in life, you're tired of doing it. If your expenses are such that you can get by on your Social Security income, or a combination of Social Security and other income sources, then there comes a point when you should let yourself off the hook after a lifetime of hard work. Of course, if you're going to claim Social Security early for this reason, you should make sure to have a healthy retirement savings balance to compensate for a lower monthly benefit. But if that's the case, you shouldn't feel guilty about taking benefits as soon as you're entitled.
For every good reason to claim Social Security at 62, there's an equally good reason to wait. But if these points resonate with you, then it pays to consider filing for benefits as early as possible.