When it comes to signing up for Social Security, seniors get choices. Waiting until full retirement age (FRA) means avoiding a reduction in benefits. Rather, at FRA, you'll get the complete monthly benefit you're entitled to based on your personal wage history.
You also have the option to sign up for Social Security as early as age 62, or to file beyond FRA. Claiming benefits before FRA will result in a reduction, while delaying will result in credits that boost your monthly benefits, up until the age of 70.
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Since age 62 is the earliest age to file for Social Security, signing up then means facing the largest possible reduction in benefits you can be subject to. In fact, if your FRA is 67, which is the case if you were born in 1960 or later, a filing at age 62 will mean slashing your benefits by 30% -- for life.
It's for this reason that seniors are often warned not to claim Social Security at 62. Taking such a large hit on benefits could have major consequences.
In fact, recent data from Northwestern Mutual shows that the average 60-something only has $112,500 saved up for retirement, while the average 70-something only has $113,900. If your savings are in comparable shape, then you may not be able to afford a Social Security filing at age 62.
But that doesn't mean that claiming Social Security at 62 is a poor choice for everyone. In fact, there are some scenarios where filing early makes a ton of sense.
When you have plenty of other money
Someone with roughly $113,000 in retirement savings may become heavily reliant on Social Security once their career wraps up. But what if your retirement savings balance is closer to $2 million? That's a very different situation.
If you have lots of money saved, a hit to your monthly Social Security benefits may not hurt you financially. But what it might do is enable you to retire early without stress -- which is something you deserve to do if you have a few million dollars to your name. It might also allow you to do things like travel at a younger age when your health might be more optimal.
When your health is working against you
It's hard to predict your own lifespan with any degree of certainty. But it's also important to face the reality that if your health just isn't so great as retirement approaches, you may not end up living such a long life. And that actually makes the case for an early Social Security filing.
While claiming Social Security at 62 might result in less monthly income from the program, you might end up with more lifetime income by virtue of starting to collect your benefits at a younger age. So if you have reason to suspect that you may not live as long as the typical senior, then it pays to consider claiming Social Security as soon as you're eligible for benefits.
The advice to hold off on claiming Social Security is suitable for a lot of people -- particularly those with limited savings and those with average or good health. But in some situations, an early filing is a smart move, not the opposite. Be honest about the category you fall into when making your choice.
