Social Security retirement benefits first become available at age 62. While you may be eager to start your checks ASAP, doing so has serious financial consequences. Specifically, starting checks so young means reducing checks by as much as 30% (depending on your full retirement age) since you'll be hit with the maximum amount of early filing penalties.
Despite the fact your monthly retirement benefits will be reduced by an early claim, sometimes starting your checks at 62 makes sense anyway. In fact, there are four situations when filing for benefits as soon as you can is exactly the right move.
1. You have serious health issues
Sixty-two is the earliest age you can start benefits. If you delay a claim for Social Security checks beyond that age, your monthly benefits increase for each month you wait. But, of course, you're passing up income you could've had if you hadn't waited.
Delaying the start of your checks can make sense if you live long enough for the extra money you get by waiting to make up for the income you missed out on. But if you have health issues, you may not get extra checks for very long if you pass away young. So you could end up much better off by starting your checks ASAP.
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2. You could drain your savings if you don't claim benefits
Sometimes, you have to retire or cut back on working hours when you're young. If that happens when you're 62 (or younger) and you don't claim your Social Security as soon as you become eligible, you may need to rely on your nest egg to produce income to live on.
Without Social Security coming in, you'd inevitably need to make larger withdrawals from your investment accounts since they're probably your other main source of retirement funds. If delaying a claim for Social Security necessitates taking such large withdrawals that you risk draining your nest egg dry, you'd be much better off starting checks at 62 to preserve your retirement savings.
3. You want a higher-earning spouse to wait to claim
If you're married, coordinating with your spouse is crucial to making the most of Social Security. In many cases, it makes sense for the lower earning spouse to start their checks at the age of 62. Doing so could provide necessary income for the couple to live on while the higher earner delays their own claim for benefits.
Delaying the claim of the higher earner makes sense for two reasons. First, they get a bigger boost by delaying, since the increase to Social Security checks that comes from waiting to claim them is calculated as a percentage of your benefit amount. Second, a higher earner delaying their claim can result in larger survivor benefits for widows because the last surviving spouse gets to keep the higher of the two checks either partner was receiving.
4. You'd rather have the money when you're younger
Although delaying the start of your Social Security checks increases the income they'll provide, it also increases the chance you'll have developed health issues that affect your ability to enjoy your money.
Many people would prefer to get smaller benefits when they're younger so they can do things they like with the cash, such as traveling. As long as this won't leave you with too little to live on later, this may be a good approach for you as well.
Ultimately, you need to consider your own individual situation and think about your health and your priorities as a retiree to decide if claiming Social Security at 62 makes sense for you. Don't assume that just because you get smaller monthly checks, you'll end up worse off with an early claim.
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