It's a question most retirees repeatedly ask themselves. Do I begin collecting Social Security retirement benefits at the earliest possible age of 62, knowing my monthly payment will be reduced? Or do I wait -- possibly all the way to 70 -- for a bigger payout?
The difference isn't insignificant. For 2025, claiming at 62 will mean your payments are nearly 30% less than what they would be if you wait until you reach your intended full retirement age (or FRA). That's just under 67 now, but will be 67 beginning next year. And waiting until you turn 70 to initiate benefits will make your payments roughly 25% greater than they'd be at your official FRA. Given that the average retiree's Social Security payment currently stands at just over $2,000 per month, claiming age can make a difference of several hundred dollars per month.
What's the No. 1 reason someone might want to accept a reduced payment and claim Social Security at the age of 62 anyway? Here's some food for thought.
Other good reasons to file early
There's more than one reason to initiate your retirement benefits early, for the record. For instance, if you're married and there's a bit of age or income disparity between you and your spouse, there's a case to be made for the younger or lower-lifetime-earning spouse beginning their benefits as soon as possible.
The rules regarding spousal Social Security can be complex. But generally speaking, surviving spouses are eligible for their own determined payment or up to 100% of their partner's benefits, whichever is greater, once that partner passes away. If the lower-earning or younger spouse claims at 62, it brings in cash that could increase later when the older and/or higher-earning partner is deceased.
Now, the age at which either or both spouses initiate benefits can be a factor in how much benefit they're collectively or individually due. So there may be exceptions to the rule of thumb described above. Be sure to ask the Social Security Administration or a qualified financial advisor familiar with your situation for a plan that works best for you. Just know that being married gives you some strategic options for claiming Social Security benefits you'll want to consider before filing.
And if health problems could mean a shorter life, starting your payments as soon as you possibly can may allow you to collect more than you would by waiting.
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And there's another reason it wouldn't be crazy to claim early even if you don't necessarily need the money right now. That is, there's a good chance you could invest it and achieve a better effective return than you would by waiting. Most estimates put the effective annualized return on waiting to file somewhere between 4% and 6%. If you're confident you can beat that, initiating your benefits and investing these cash payments makes sense. Just bear in mind you'd most likely need many years to ensure you'd beat the average yearly benefit of waiting to claim.
The prospect of reduced benefits due to the program's waning solvency is even becoming a stronger argument for initiating your benefits earlier than later. As of its latest calculation, the Social Security Board of Trustees fears it will have no choice but to impose 23% across-the-board cuts to all of its payments by 2034. Filing at the earliest possible age of 62 may mean a significant reduction in the size of your monthly Social Security payments. However, you'll at least collect 100% of this reduced payout for a few years before everyone suffers the same sweeping degree of reduction.
The No. 1 reason to claim Social Security at age 62
So what's the best reason to file for Social Security's retirement benefits when you turn 62 even if it does mean a significantly reduced monthly payment? You need -- or even just want -- this money now. It's admittedly not the most sophisticated or strategic of answers. But it is an honest one.
See, there's more to life than money. Your time, for instance, is far more valuable. A little less income that you begin collecting sooner may allow you to more fruitfully enjoy your life at a time when your life can be more enjoyable. In other words, there's something to be said for living in the moment (particularly when future moments aren't guaranteed).
This need doesn't necessarily have to satisfy simple lifestyle preferences, though. It can be practical, too. For example, if you're dealing with debt or you're at risk of losing your home and have exhausted all other options, by all means claim early! Being stubborn about waiting to file for Social Security benefits could end up putting you into an even more difficult situation in the future.
This might help you come to a decision: Although initiating your benefits before reaching your official FRA reduces your monthly payments, the calculation of your age-based reduction of these benefits just reflects the Social Security Administration's efforts to make the program fair and equitable for all its beneficiaries. On average, total lifetime benefits end up being about the same for everyone.
Some people simply choose to space these benefits out over a longer timeframe. The biggest risk here is dying before getting back out of it all that you've paid into the program in the form of payroll taxes. Just consider all the relevant facts as well as all the potential unknowns and likelihoods before making the call.
For instance, while the U.S. Center for Disease Control says the average life expectancy for someone living in the United States is just a little over 78, the Social Security Administration points out that anyone who reaches the age of 65 is then likely to live to the age of 84. Moreover, the Census Bureau reports that about 5% of the country's 65-and-up crowd are currently 90 years old or older.
In other words, there's a pretty good chance anyone old enough to be thinking about when to claim Social Security benefits is going to live for quite a bit longer. Just make sure claiming early won't undermine your likely future too much for too long.
