One good thing about Social Security is that you’re not required to claim benefits at one specific age. Rather, you get a fairly lengthy window to sign up that begins at age 62 and ends at age 70. (In fact, technically, you can file for benefits beyond your 70th birthday, but there’s no financial incentive to do so).
But having choices can sometimes backfire on you — namely, if you wind up making the wrong one. Such is the conundrum many seniors face.
See, filing for Social Security at the earliest possible age of 62 is tempting. That way, you get your benefits sooner, and you can use that money to buy yourself more financial flexibility later in life. The problem with claiming benefits at 62, however, is that you’ll end up reducing them on a permanent basis.
You’re not entitled to your full monthly Social Security benefit based on your earnings history until you reach full retirement age, or FRA. FRA is either 66, 67, or somewhere in between, depending on the year you were born. Many seniors are advised to shy away from claiming benefits before FRA to avoid slashing them, and for some, delaying past FRA makes sense, since that means boosting those benefits by 8% a year, up until age 70, at which point increases no longer accrue.
Despite all of this, 62 remains the most popular age to sign up for Social Security. But is claiming benefits that early a mistake?
Weighing your options
Is chocolate the best ice cream flavor, or is it vanilla? Well, it depends whom you ask. That’s also the way you should think about filing for Social Security early.
Is claiming benefits at 62 a poor choice? Maybe, if you don’t have much in the way of retirement savings and you anticipate being heavily reliant on those benefits to pay the bills once you stop working.
But in other scenarios, filing for Social Security at 62 isn’t unwise. If your health is very poor as retirement nears and you fear you won’t live a long life, claiming benefits at 62 could end up putting more money in your pocket in the course of your lifetime. And if you’re planning to use that money to start a business or invest, it could end up making you richer over time.
Furthermore, in some cases, seniors have no choice but to file for Social Security at 62. If you lose your job at that age, for example, you may need those benefits to pay your living expenses or otherwise risk a pile of unhealthy debt.
Therefore, don’t ask whether claiming Social Security at 62 is a mistake; figure out whether it’s a mistake for you. You may have a perfectly good reason to sign up for benefits as early as possible, despite the reduction you’ll face, so think about your own circumstances rather than worry about what’s best for the average senior. In fact, the whole reason the Social Security Administration gives you a choice as to when to sign up is that it recognizes that different people have different needs. And if you take the time to think things through, you’re likely to end up claiming benefits at exactly the right time — whatever that means for you.
