There's a reason 62 is the most popular age to apply for Social Security: It's the earliest age you're allowed to start claiming benefits. While filing for Social Security at age 62 does mean reducing your monthly benefits, there are some situations where it pays to enroll early. Here are three reasons to consider signing up for Social Security as soon as you can.
1. You're unemployed, and not by choice
Whether you're out of work because of job elimination or health reasons, in the absence of significant savings, those missing paychecks can quickly start to hit you where it hurts. If you're desperate for money, it makes more sense to start taking your benefits early rather than risk losing your home or resorting to credit card debt. The latter can be especially destructive later in life, because if you wreck your credit in your 60s, you'll be leaving yourself even more financially vulnerable at a time when your income isn't steady and your borrowing options may already be limited. And while paying off a credit card balance may actually be more cost-effective than reducing your benefits by 30%, which is the hit you'll take if your full retirement age is 67 but you claim at 62, collecting your benefits early won't mess with your credit.
2. Your health isn't great
Social Security is actually designed to pay you roughly the same lifetime benefit amount regardless of when you first file. Here's how that plays out: Let's say your full retirement age is 67, at which point you're eligible for $1,200 a month in benefits, but instead, you start claiming at 62, thereby reducing your monthly check to just $840. At that point, you'll be losing $360 a month in benefits, but you'll also start collecting those benefits 60 months early. Now in our example, the breakeven age is around 78 -- meaning, if you live till 78, it won't matter that you started taking your benefits early, because you'll wind up with about the same lifetime payment as you'd get by waiting till 67. But if you live past 78, you'll make more money by waiting till your full retirement age to start taking benefits. And this is precisely where your health comes into play.
It's not easy to think about our health in terms of numbers and life expectancies, but if your health is poor, and you're not likely to live past (or until) your breakeven age, then it pays to claim your benefits early. Using our example, let's say you start taking benefits at 62 but pass away at 75. At that point, you'll have collected $131,000 in lifetime benefits. Waiting till 67, on the other hand, would give you just $115,000 in lifetime benefits.
3. Your health is great, and you want to take advantage of it
It stands to reason that you'll have more energy to enjoy your retirement at 62 than you will at 72, 82, or older. So if you're in good financial shape and don't actually need the money from your benefits to pay your living expenses, but rather want the money to use for entertainment purposes, it pays to file for Social Security as early as possible. This way, you can enjoy that money while you're young enough to make the most of it. So go ahead: Take that cruise, join that new country club, and make plans to sample every early bird special in a 30-mile radius. You've earned that money, and if your savings are such that you can afford to take a reduction in benefits, go for it.
While signing up for Social Security at 62 isn't the right move for everyone, in some cases, it most certainly makes sense. Remember, too, that there are different strategies out there for taking Social Security, and the more you learn about how Social Security works, the more likely you'll be to make the best decision for yourself.
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