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There are tons of factors that determine the size of your monthly Social Security check upon retirement. However, one of the major factors is the age at which you decide to claim. You can retire anytime after 62, and your benefits will keep changing all the way until 70 (at which point they are maximized).
Technically, 62 is not retirement age. However, many people learn that you can receive Social Security starting at 62 and are very tempted to retire early. Often, the advice is absolutely not to retire early, but this isn't necessarily true in all situations. There are some very good reasons why you might want to claim Social Security at 62!
Claiming early can be a sound financial strategy, providing financial security, flexibility, and even potential strategic benefits despite the reduction in monthly payments.
We'll take a look at why the common advice of waiting before claiming Social Security isn't correct for everyone!
Full Retirement Age and Social Security
Understanding how Social Security works is vital for retiring financially prepared.
Before we can understand the implications of claiming Social Security early, it's important to understand the Full Retirement Age and how age affects Social Security benefits.
The standard advice for most retirees is to delay claiming Social Security benefits until they reach their Full Retirement Age (FRA). FRA is a specific age determined by your birth year, ranging from 66 to 67 for those born after 1960.
Why Wait
Waiting until your FRA allows you to claim the full benefits you're entitled to based on your income. If you retire before you reach FRA, your monthly benefit will be lowered. The amount it's lowered depends on how early you retire. If you retire at 62, your benefits will be about 30% lower than they would be otherwise.
Waiting Longer
If you wait past FRA, your benefits increase for every month you wait up until age 70. After that, your benefits have reached their max and won't increase any further.
Because of this increased monthly benefit, many people aim to put off claiming Social Security as long as possible. However, we have a whole guide on why 70 isn't the best time to claim Social Security . In fact, some people might want to claim as early as 62. Let's look at why.
1. Financial Security
Before deciding whether or not to claim Social Security early, consider your savings and other income streams.
For some individuals, Social Security can provide some much-needed income when they need it the most. Health problems and unexpected job loss can have significant financial impacts, potentially making claiming Social Security early the best option.
Unexpected medical bills or other unforeseen costs can derail even the most well-laid retirement plans. Claiming Social Security early creates a financial buffer to weather these storms without depleting retirement savings.
Things Change
In many cases, these are situations you plan for. You may plan on retiring later, only for an unexpected situation to derail your original plans. Luckily, Social Security is flexible enough to take these situations into account and allows you to start claiming as early as 62.
2. Flexibility
Having your Social Security check in your pocket provides you with many more options than waiting does, making it potentially worth claiming early.
Claiming early provides you with some extra flexibility in several different areas. For one, if you decide to retire early, claiming Social Security early can provide you with more income to do the things you want to do. If you plan to take up new hobbies or travel, the added income from Social Security can be a huge boost.
Claiming early also allows you flexibility with your Social Security check. You don't necessarily have to spend the money you receive. Instead, you can save it or even invest it.
You may decide that getting the extra money and putting it into a savings account makes more sense than waiting for FRA.
It's Your Money!
Once you're receiving your benefits, you can change your mind about what to do with the money at any time. If you have an emergency, you can rest assured that you'll get your check each month. You don't have to worry about applying for benefits and waiting potentially several months to receive them.
Having more income provides you with added flexibility in many different ways, which is one of the big reasons people decide to claim early.
3. Optimizing Benefits for Couples
Consider your spouse's benefits and consider strategically drawing at different times as part of your overall retirement strategy.
It's complicated enough planning for your own retirement. If you're married, trying to plan for your retirement as a couple Can be even more complicated!
Social Security offers spousal benefits to qualified spouses. These benefits are based on a spouse's Full Retirement Age benefit amount. By claiming early at 62, one spouse allows the other spouse's benefit to continue growing until their FRA. This can maximize the total combined benefit the couple receives throughout their retirement.
Work Together
Often, it makes more sense for the lower-earning spouse to claim early, as they'll receive a lower penalty. The higher earner can continue to let their benefit grow. This strategy allows the couple to start receiving some income immediately while also maximizing the benefit the higher earner will receive later.
If you're married, it's important to consider your spouse's benefits, too, when creating a retirement plan.
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