When it comes to collecting Social Security, you get a choice of when to sign up. The earliest age to take benefits is 62. But if you file at that point, you'll generally reduce those monthly payments for life.
That's why retirees are often advised to wait until their full retirement age arrives to claim Social Security. Waiting until that point means your benefits won't be reduced, leaving you with more guaranteed income every month.
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But even though you might read that claiming Social Security at 62 is risky, I'm here to tell you that it may not be. It really all depends on your personal situation.
Why filing for benefits at 62 may not be a terrible idea
The downside of claiming Social Security as early as possible is clear: You'll slash your monthly benefits. But there's an upside -- getting your money sooner.
That upside may seem obvious, but getting benefits sooner could also translate into more lifetime income from Social Security on a whole. And that's a factor you need to think about.
If you end up living a long life, then an early Social Security filing tends to work against you, leaving you with less total income from the program all-in. The problem, though, is that no one knows how long they'll live. And because of that, it can be argued that for each day you delay your Social Security claim past your 62nd birthday, you're taking a risk -- the risk of getting less lifetime income from the program.
Let's run a break-even scenario to further illustrate this point. Say you're eligible for a $2,000 monthly Social Security benefit at age 67, which is full retirement age for anyone born in 1960 or later. If you sign up at age 62 instead, your monthly benefit shrinks to $1,400. But by roughly age 78 1/2, you're breaking even, coming away with $278,000 and change in total benefits to date.
The question to then ask yourself is whether you want to run the risk that you won't live until 78 1/2. Because if you pass away any sooner, you lose money by virtue of not taking benefits at 62 in this example.
It's for this reason that claiming Social Security at 62 isn't as risky as you might assume. The idea of reducing your benefits on a monthly basis for the rest of your life may seem scary -- until you take a minute and realize that the rest of your life isn't a period of time you can quantify ahead of time.
Look at the big picture
I'm not going to sit here and tell you to file for Social Security the moment you become eligible. What I am telling you is that you shouldn't write off the idea of claiming benefits at 62 because it's a so-called risky decision. Instead, I'd encourage you to look at the big picture when making your filing choice.
Consider the state of your health as a guiding factor for how long you might live with the understanding that things can, for better or worse, change on a whim. But also, consider your financial circumstances.
If you're still at a job you enjoy at age 62, you may want to put your Social Security claim on hold since you don't need the money. If you have a nice amount of savings and feel you could use your benefits sooner to better enjoy them, then you may want to sign up as early as you're allowed to.
The point is simply to not call claiming benefits at 62 an automatic risk -- because when you think about it, claiming Social Security at any given age over another carries inherent risk. It's just a matter of what type of risk you want to take on.
