You're entitled to your full monthly Social Security benefit based on your earnings history once you reach full retirement age (FRA). That age is 67 if you were born in 1960 or later.
Now you don't have to claim benefits at FRA. You can sign up for Social Security as early as age 62. You can also delay your Social Security filing past FRA and boost your benefits in the process. (Specifically, your benefits get an 8% boost per year you hold off, up until you reach the age of 70.)
You'll often hear that delaying your filing is a financially sound choice, whereas claiming Social Security early is problematic -- namely, because it leaves you with a lower monthly benefit for life. But here are a few scenarios where a smaller benefit really isn't a bad thing.
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1. When your health is poor
Claiming Social Security early will shrink your monthly benefit. But it may not result in a lower lifetime benefit.
In fact, if your health is poor, then it generally pays to claim Social Security as early as possible rather than delay your filing. The logic is that you don't know how many years of benefits you'll end up collecting, so if you don't expect to live such a long life, it makes sense to start getting your money sooner.
2. When you don't really need the money
Some people who claim Social Security immediately start using their benefits to cover their living expenses. But if you don't need the money per se, then there's absolutely nothing wrong with an earlier Social Security filing.
Let's say you've managed to amass a gigantic nest egg by saving well throughout your career. The benefits you get from Social Security may represent nothing more than extra cash you spend on things like leisure. So if you want that money sooner, go for it.
3. When you're using the money to make money
It takes money to make money. You may be interested in ending your career but embarking on a new venture, like a small business. If you claim Social Security early, your benefits could serve as seed money for that business. And while you will take a hit on your monthly payments by signing up for Social Security before reaching FRA, if your business does well, you could more than make up for that hit.
You might even decide to take your Social Security benefits early and invest that money in stocks or other assets. If you're a shrewd investor with a history of success, the returns you generate in your portfolio might exceed the hit you take by claiming benefits ahead of FRA.
Filing early isn't always a bad thing
For some people, it makes sense to hold off on claiming Social Security until FRA, or even beyond. If, for example, you're really starting off retirement with little to no savings, then you might need a higher monthly benefit to cover your various bills. But a lower monthly benefit isn't automatically a bad thing, so don't assume that filing for Social Security early is a decision you'll regret.
