Deciding when to claim Social Security is one of the most important -- and stressful -- financial choices you might ever have to make. After all, your filing age will help determine how much monthly income you get.
The earliest age to sign up for Social Security is 62. However, you're not entitled to your monthly benefits in full until full retirement age arrives. That age is 67 if you were born in 1960 or later.
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In fact, you don't even have to sign up for Social Security at full retirement age. You could delay your claim until age 70 for even larger monthly benefits.
Still, a lot of people get tempted to claim Social Security at 62 because the money is available immediately, albeit at a reduced rate compared to full retirement age. And it's hard to say no to a guaranteed monthly paycheck, even if waiting could result in larger benefits.
If you're not sure whether to claim Social Security at 62 versus wait longer, here's how to decide.
Reasons to claim Social Security at 62
Despite the reduction in benefits you'll face if you claim Social Security at 62, there can be some good reasons to file early.
First, if you've lost your job and are struggling to find a new one, you're generally better off claiming Social Security if you need income than taking on high-interest debt. Putting your expenses on credit cards for months or years on end could wreck your finances and make your senior years very stressful.
In that scenario, claiming Social Security at 62 might allow you to take on a part-time job and use that income plus your benefits to cover your costs with relative ease. And you're allowed to work while collecting Social Security, though there are rules to be aware of if you haven't yet reached full retirement age.
Another good reason to claim Social Security at 62 is if you're in poor health and don't expect to live a long life. Filing early might reduce your benefits on a monthly basis. But if you only live until your mid-70s, for example, an early claim could leave you with a lot more money on a lifetime basis.
Finally, claiming Social Security at 62 could make sense if you can no longer work and have savings but want to preserve your nest egg.
It may be that the market is down when you retire at age 62. Taking money out of your IRA or 401(k) at that point could lead to a serious long-term income shortfall. Leavings your retirement savings untapped to ride out a downturn could lead to a better outcome, and claiming Social Security early might allow you to do that.
Reasons to wait on Social Security
While there are certain scenarios where claiming Social Security at 62 makes sense, there are also good reasons to wait until full retirement age or beyond that may apply to you.
First, if you're in great health and have a family history of longevity, filing for benefits at a later age could put more lifetime Social Security income in your pocket.
Also, if you're still working at age 62 and don't need the money, it could make sense to let your benefits grow. Besides, if you claim benefits prior to full retirement age, you'll be subject to Social Security's earnings test. Exceeding its limits could result in withheld benefits, thereby minimizing the value of collecting that money early.
Furthermore, if you don't have a lot of money saved for retirement, you may need larger monthly Social Security checks to be able to cover your bills without worry. This especially holds true if you expect to live a fairly long life.
Finally, if you're married and your spouse is both much younger than you and a lower earner, they may become reliant on survivor benefits from Social Security if they outlive you. The more Social Security you collect each month, the larger your spouse's survivor benefits will be, which is a good reason not to sign up early and slash those monthly payments.
All told, the decision to claim Social Security is not an easy one. It's easy to see why you may be considering a claim at 62. And you should know that it's not automatically a poor choice. The key is to have a good reason for claiming benefits early, and to make sure that doing so won't have negative financial repercussions.
