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3 Awful Reasons to Take Social Security Benefits at 62

By Dan Caplinger – Feb 1, 2016 at 6:02AM

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Taking Social Security at your first opportunity is tempting, but don't do it for the wrong reasons.


Image source: Wikimedia Commons.

Millions of Americans receive Social Security, and many of them look forward to taking monthly benefits as soon as they possibly can. But even though there are some good reasons to start receiving Social Security at the minimum age of 62, many of the reasons that people give for taking Social Security as early as possible don't hold up to closer scrutiny. Let's take a look at some of the worst reasons to claim benefits at age 62 and how to make the best choice for your financial situation.

1. The Social Security Trust Fund is going to run out of money.
Retirees constantly hear how the trust fund that holds collected Social Security payroll taxes is running out of money. The latest estimates from the Social Security Trustees put the ending date for the combined retirement and disability trust funds at 2034. Some people look at that estimate and figure they need to take as much as they can while the getting's good.

Yet people misunderstand two things about the trust fund. First, it's extremely likely that lawmakers will take steps before 2034 to ensure no interruption in benefits, as they did late last year in making changes to the disability program. Second, even if lawmakers failed to take action, you'd still get more than three-quarters of the benefits to which you're entitled. Panicking over the possibility of the program ceasing to exist just doesn't make sense.

2. The government could take my benefits away.
Similarly, some people figure that they need to claim as soon as possible before the government makes changes that could threaten their future benefits. The Supreme Court has ruled that when lawmakers pass laws affecting Social Security, recipients don't have any standing to challenge the laws on the basis of their having had a property right taken away from them.

It's true that Social Security changes are possible at any time. Typically, lawmakers including grandfathering provisions to any changes in order to protect those who are already receiving benefits or who expect to receive them in the near future. Although there's no requirement to do so and no guarantee that future law changes will have such provisions, the political framework makes it hard for those crafting policy to make abrupt, surprising changes.

3. Many benefits of waiting until full retirement age just got taken away.
One example of a legal change affecting benefits took place late last year, when policymakers took away the ability to file and suspend and to file a restricted application for spousal benefits. Grandfathering provisions allow people to use the file-and-suspend strategy through April, and those who turned 62 by the end of 2015 will be able to file restricted applications whenever they reach full retirement age. For those who don't qualify for the grandfathering provisions, however, the loss of the file-and-suspend and restricted application strategies takes away some of the incentive for not taking benefits at age 62 and instead waiting until age 66.

The ability for couples to receive one spousal benefit while allowing one spouse's retirement benefit to continue to grow was indeed a major reward for having the patience to wait for full retirement age before claiming benefits. Taking away those strategies in some cases will be enough to push the balance back toward claiming early. However, you shouldn't focus solely on that factor in deciding whether to take benefits early. Instead, be sure to consider the other pros and cons, including locking in survivors benefits for your spouse and children. You might find that even with recent legal changes, there's still good reason to wait.

Waiting past age 62 for Social Security benefits can be financially challenging in the short run. But it still makes sense to look at the pros of waiting before making a final decision. In particular, relying on the three reasons described above without looking into the issue further can lead you to make a huge mistake.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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