Don't Write Off Claiming Social Security at 62

In the course of your retirement planning, one of the most stressful decisions you might have to make is figuring out when to claim Social Security. You can file for those monthly benefits at any age starting at 62. Many seniors do, in fact, claim Social Security as early as possible.

There's a serious downside to doing that, though. Filing for Social Security at 62 means slashing your monthly benefits for life.

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How much of a reduction are we talking about? If your full retirement age is 67, which is the case if you were born in 1960 or later, claiming Social Security at 62 means locking in monthly checks that are 30% smaller. That hit could really sting at various points in life.

Plus, reduced benefits also mean smaller cost-of-living adjustments through the years. So it's a decision that could have major consequences.

But that doesn't mean you should write off the idea of claiming Social Security at 62. Though your monthly payments will be reduced, there are other perks you might enjoy.

You could preserve your portfolio

If you've saved a lot of money for retirement, you may be planning to end your career at 62. But what if the market tanks right as your retirement date approaches? Suddenly, you have a dilemma.

You could delay retirement until the market recovers. But that might take a few years.

You could move forward with retirement and tap your IRA or 401(k) as planned. But that might force you to lock in serious portfolio losses early in retirement, thereby increasing the risk of depleting your nest egg at some point.

Or, there's another option -- claiming Social Security. Doing so might reduce your monthly benefits. But it could also take a lot of pressure off your portfolio if market conditions aren't optimal, allowing you to keep your retirement plans.

You might get a larger lifetime payout

Although claiming Social Security at 62 is guaranteed to reduce your benefits on a monthly basis, it may not reduce your Social Security income on a lifetime basis. In fact, if you have health issues and think you're in for a shorter life expectancy, it could make sense financially to take benefits at 62.

Remember, the difference between claiming Social Security at 62 versus 67 is 60 monthly payments. If you only end up living until your early 70s, there's a good chance you'll end up with a lot more total Social Security income by taking benefits as early as possible compared to waiting for full retirement age.

The money might do you more good earlier in life

If you're in good physical shape at 62, there's no reason to think your body will somehow fall apart by the time full retirement age arrives. But do you want to take the chance?

If your retirement goals require great health, it could pay to claim Social Security at 62 if you need your benefits to do the things you've always wanted to. For example, hiking your way through South America may be a top retirement priority. If you're up to the challenge at 62, it could pay to take benefits rather than risk not being physically able to take that trip later on.

Don't assume an early filing is a bad idea

Claiming Social Security at 62 means reducing a guaranteed monthly check substantially. That's a serious thing. You'll need to make sure your budget can handle a reduced benefit and that you have enough outside income to compensate.

You may decide that filing for Social Security at 62 is too risky. And that's fine. There's absolutely nothing wrong with filing later if that's more in your comfort zone.

The point, rather, is that you shouldn't assume that claiming Social Security at 62 is a poor choice. Depending on your situation, it may actually be an optimal one.

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