Social Security is an integral source of income for millions of retirees, and the age you begin claiming will have an enormous impact on the amount you receive each month.
Age 62 is the most popular time to file, with around 35% of men and nearly 40% of women claiming at this age, according to a 2020 report from the Bipartisan Policy Center. However, the fact that it's the most common age to file doesn't necessarily make it the best age to file.
While there are certain situations where claiming early is your best option, there's also one very good reason to consider waiting a few years.
Image source: Getty Images.
Why it's worthwhile claiming at 62
1. It's easier to retire early
There are plenty of reasons to retire early. Some people retire in their early 60s to give themselves as much time as possible to enjoy an active retirement, while others may be forced into early retirement due to job loss or health issues.
You don't have to start taking Social Security as soon as you retire, but the two often go hand-in-hand. If you retire early but delay benefits, you'll need to survive on other sources of income for at least a few years, which risks depleting your savings too quickly.
Claiming early will result in smaller payments each month, but having an extra source of income outside of your savings can also make early retirement more affordable.
2. You won't have to bet on your longevity
Social Security is designed so that, in theory, you should collect roughly the same amount over a lifetime regardless of when you file. If you claim early, you'll receive less per month but more checks over a lifetime. By delaying benefits, you'll collect fewer payments in total, but each will be larger.
However, this assumes you'll live an average life span. If you have reason to believe you'll live well into your 80s or beyond, delaying benefits could mean collecting tens of thousands of dollars more over a lifetime.
But life can be unpredictable, and betting on your longevity can also be risky. If you file early and end up living a very long life, you may miss out on more money in benefits. But if you delay benefits and then quickly develop health problems, you'll miss out on valuable time you could have spent enjoying your retirement.
When claiming early isn't the best move
1. It will significantly limit your monthly income
Again, in theory, your total benefit amount over a lifetime should be roughly equal if you live an average life span. But your monthly payments will be substantially smaller if you file early.
To receive the full benefit you're entitled to based on your career earnings, you'll need to claim at your full retirement age (FRA). File before your FRA, and your benefits will be permanently reduced. But if you wait until after your FRA to begin claiming, you'll receive your full benefit amount plus a bonus each month.
Image source: The Motley Fool.
Say, for example, you have an FRA of 67 years old, and by filing at that age, you'd receive $1,800 per month (which is roughly the average benefit among retirees, as of August 2023).
If you were to file at 62, your benefits would be reduced by 30%, leaving you with $1,260 per month. Wait until 70, and you'll receive your full $1,800 per month plus 24% extra, or $2,232 per month. That's a whopping $972 more per month than you'd receive at age 62. If your savings are falling short, that extra income can be life-changing.
There's no right or wrong time to take Social Security, as there are advantages and disadvantages to both claiming early and waiting a few years. By considering your priorities, it will be easier to decide which age is best for your unique situation.
