You get plenty of choices when it comes to signing up for Social Security. The earliest age to claim benefits is 62, but if you file before reaching full retirement age (FRA), your benefits will be reduced on what's usually a permanent basis.
FRA kicks in at 66, 67, or somewhere in between, depending on the year you were born. And filing at 62 will result in a monthly benefit that's 25% to 30% lower than what it could've been had you waited until FRA.
Despite what could be a pretty substantial hit, claiming Social Security at 62 can make a lot of sense depending on the circumstances at hand. Here are three scenarios where it pays to file early -- even if it means accepting a lower monthly benefit during retirement.
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1. You hate your job -- and it's harming your health
Some people don't mind their work and manage to power through it just fine. Other people are fortunate enough to love what they do.
But if you're in the opposite boat, and you absolutely can't stand your job, then it may be time to leave it behind -- especially if it's harming your mental or physical health. And claiming Social Security early could be your ticket to making that happen.
Imagine that over the past few years, your job has contributed to higher blood pressure and a host of other conditions that could actually shorten your life expectancy. Is it really worth putting your health at risk like that for a few extra years of paychecks?
Now if you're glaringly behind on retirement savings, then the answer may be "yes." But if you've amassed a respectable nest egg, then it may be time to file for Social Security to lock in some replacement income, and then tender your resignation once those benefits are on their way.
2. You want to pursue a new career path
The job you have may not be harming your health, but it might still be a dud. And you may have dreams of pursuing a different career -- one that's more rewarding and enjoyable.
But what if that second career also pays a lot less? You may not be able to get by on that much lower income -- unless, of course, you file for Social Security and are able to use your benefits as a supplement.
If that's the case, then it may be worth filing early to make that change sooner rather than later. After all, we spend so much time at work that it's important to get something out of it. And if you're 62 years old, then let's face it -- you may not have a ton of time in the workforce left. So if you've always wondered what it would be like to become a private chef instead of an accountant, claiming Social Security early could give you a prime opportunity to find out.
3. Your savings can buy you the freedom to file whenever you want
If you're behind on retirement savings by the time age 62 arrives, then you may need to consider holding off on filing for Social Security -- because you might need a larger monthly benefit to compensate for a nest egg that isn't in the best of shape. But if you've saved a ton of money, to the point where your Social Security benefits will comprise just a small portion of your total retirement income, then filing early is something you shouldn't hesitate to do.
Imagine you've amassed a $3 million nest egg by age 62, but you don't want to tap it just yet. At the same time, you may be ready to bring your career to a close or scale back to part-time work. Claiming benefits early could make it possible to do that. It could also give you more freedom to travel and pursue different hobbies and activities while you're a bit younger, thereby allowing you to make the most of them.
The clear downside of claiming Social Security at age 62 is getting stuck with a lower monthly benefit throughout retirement. But in some cases, that hit is definitely worth taking. And if these situations apply to you, it may be time to file for benefits -- and improve your life in one way or another.
