You may have heard that Social Security is deep in the throes of a financial crisis. That's a pretty fair assessment.
Because of a mass exodus of baby boomers from the workforce, Social Security is expected to face a revenue shortfall in the coming years. This shortfall may be so substantial, the Social Security Administration (SSA) won't be able to keep up with scheduled benefits without tapping its trust funds.
Thankfully, Social Security has cash reserves it can fall back on. But that money will only last so long.
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In its most recent report, the Social Security Trustees projected that the program's trust funds will run dry by 2034. Once that happens, Social Security may have to cut benefits to the tune of around 20%.
Clearly, that has the potential to spur a widespread poverty crisis among the elderly. Many seniors get most of their income from Social Security right now. And for some retirees, it's their only source of income. Cutting benefits could be downright catastrophic for retirees who are already cash-strapped.
As such, lawmakers are pretty invested in finding ways to prevent Social Security cuts. And doing so might boil down to making changes to the program's rules. But that could mean taking 62 as the earliest Social Security filing age off the table.
You might have to wait to get benefits
Right now, age 62 is the earliest age at which you can sign up for Social Security. And you're entitled to your full monthly benefit, based on your personal wage history, once you reach full retirement age, or FRA.
FRA is currently 67 for anyone born in 1960 or later. But lawmakers have proposed pushing FRA back to 68 or 69 to give Social Security more financial breathing room. If that were to happen, then lawmakers might also decide to push up the earliest age to take benefits to 63 or 64.
That's why you may not want to bank too heavily on being able to claim Social Security at 62. While that's certainly an option right now and is likely to be an option in the near term, if you're years away from retirement, Social Security's rules could end up looking quite different by the time you're ready to wrap up your career.
A filing at age 62 may not be your best choice
Whether claiming Social Security at 62 will remain an option for the long haul is yet to be determined. But either way, you may want to think twice before signing up for benefits at the earliest age possible -- no matter what it happens to be.
Unlike your retirement savings, which have the potential to run out, Social Security is supposed to pay you the same monthly benefit for life (not accounting for potential cuts, of course). If you lock in a lower monthly benefit by filing ahead of FRA, you might sentence yourself to many years of financial strain in retirement.
Furthermore, it's important to recognize that Americans are living longer these days. That's part of the reason lawmakers are able to justify potentially moving FRA back a year or two.
The longer you live, the greater your chances of depleting your retirement savings in your lifetime. But claiming Social Security at a later age -- and avoiding a hit to your benefits by filing early -- could help offset that risk, even if you end up living into your 90s or beyond.
