Claiming Social Security at 62 Will Shrink Your Benefits. Do It Anyway in This Situation.
Key Points
If you claim Social Security at 62 and your full retirement age is 67, your monthly benefits will be reduced by about 30%.
When you don't have other income to fall back on, an early Social Security claim becomes dangerous.
When you have plenty of savings and want to enjoy your benefits to the fullest, it pays to take them as soon as you're able to.
- The $23,760 Social Security bonus most retirees completely overlook ›
If there's one big decision retirees tend to wrestle with, it's when to sign up for Social Security. Once you turn 62, you're free to claim retirement benefits at any time. But if you don't wait until full retirement age, those checks will be reduced.
Full retirement age is 67 for people born in 1960 or later. And in that case, filing for Social Security at 62 means shrinking your monthly benefits by about 30%.
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For the most part, that's a bad decision if you don't have retirement savings or any non-Social Security income to fall back on during your senior years. But in one specific scenario, filing as early as possible could make a ton of sense.
When the money is extra and you want to enjoy it
While it's true that many people end up retiring with little to no savings, you might be someone who's been funding an IRA or 401(k) since you started collecting a full-time paycheck. If you contributed to one of these accounts steadily throughout your entire career, there's a good chance you're sitting on a few million dollars right now.
That means a couple of things. First, it means that Social Security will probably end up being a secondary source of retirement income for you, so a 30% hit to your monthly checks may not sting.
Second, if you've managed to accumulate a few million dollars in retirement savings, it means you probably worked hard, spent carefully, and made a lot of sacrifices. And in that case, you deserve to enjoy your senior years to the fullest.
If claiming Social Security at 62 gives you money to spend freely on travel, home upgrades, and things you skipped when you were deep in savings mode, then you should file for benefits early, despite the reduction.
At this stage of life, you've earned that early access to your money. And by taking benefits early, you may be able to reduce the risk of missing out on certain experiences -- for example, spending three weeks in the Swiss Alps -- due to declining health.
Look at the big picture
Of course, the decision to claim Social Security early isn't an easy one by any means. If you think you'll live an exceptionally long life because that's what your family history points to, then you may not want to slash your benefits by filing at 62.
In that case, you might need larger benefits in case your nest egg has to last 35 or 40 years. And you might also have plenty of "good years" ahead of you to travel if you've got the right genes.
The point, rather, is that filing for Social Security at 62 isn't a bad choice for everyone. And if those benefits won't be your primary retirement income stream, then you should aim to take them at a time when they'll be the most meaningful for you.
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