Seniors get a range of choices for claiming Social Security. You can sign up for benefits as early as age 62, but you won't be entitled to your complete monthly benefit based on your wage history until you reach full retirement age (FRA).
FRA kicks in at either 66, 67, or 66 and a certain number of months, depending on your birth year. You can also delay your Social Security claim beyond FRA and boost your benefits in the process.
Now, age 70 is generally considered the latest age to sign up for Social Security. While you won't be forced to file at that point, you will no longer benefit financially by delaying your claim.
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Not surprisingly, many seniors opt to sign up for Social Security at age 62 to get their money as soon as possible. Even though it means locking in a lower monthly benefit for life, that's not automatically a poor choice.
Some people claim Social Security at 62 because they worry that if they don't, the program will run out of money and they'll lose their chance to get paid. And subscribing to that line of thinking is perhaps the biggest Social Security mistake you could make.
Social Security is not going away
Social Security is indeed facing some financial challenges in the coming years that could eventually result in benefit cuts. But the program is not on the verge of going bankrupt and never paying another dollar again. And it's important to note that distinction so that you don't end up filing for benefits at the wrong time.
In fact, let's say Social Security benefits are slashed by 50% -- well beyond what the program's trustees are predicting. Let's also say you're entitled to a monthly benefit of $2,000 at an FRA of 67. Filing for Social Security at age 62, in that case, would mean slashing your benefit to $1,400. If benefits are then cut by 50%, you'll be left with $700 a month. If you wait until FRA in this scenario, you'll have $1,000 a month instead.
To put it another way, claiming Social Security early won't really help you absorb the hit of benefit cuts. All you'll be doing is giving yourself a lower baseline, so to speak, so that if benefit cuts come down the pike, instead of taking a hit on a larger payday, you'll be taking a hit on a smaller one.
Don't file early for the wrong reason
There are plenty of great reasons to sign up for Social Security at 62. If you've saved really nicely, for example, you may decide to take your money early so you can travel and do other things that could get tougher as you age. Further, if your health is poor and you don't expect to live a long life, you could come out ahead financially by claiming your benefits early when you account for your total lifetime Social Security income.
But it's not a good idea to rush to claim benefits early because you're convinced Social Security is running out of money. The program is not in danger of going away completely. And if you don't get the facts about Social Security, you could end up making a filing decision you regret for many years.
