The Social Security Administration allows you sign up for benefits beginning at age 62, and not surprisingly, that happens to be the most popular age for seniors to file. But there's a downside to claiming Social Security at 62 -- if you sign up then, you'll lower your monthly benefits for life.
You're entitled to your full monthly Social Security benefit, based on your personal wage history, once you reach full retirement age, or FRA. FRA is either 66, 67, or 66 and a specific number of months, depending on the year you were born. For each month you claim benefits ahead of FRA, they'll be reduced on a permanent basis. But in spite of that, here are a few solid reasons to sign up for Social Security as soon as you possibly can.
1. You're out of work and need the money
Millions of Americans have lost their jobs, or seen their wages take a hit, in the course of the coronavirus pandemic. If that's happened to you, then you may need to file for benefits to avoid racking up debt just to cover your basic expenses.
Even outside a pandemic, it's possible to lose a job later in life and struggle to get rehired. Employers are often hesitant to take a chance on older workers for fear they'll have one foot out the door, and if you need the money, that could hurt you. Social Security, however, could be your fallback option if you're out of work come age 62 and are having a hard time finding a job or making up for lost income.
2. You could get more lifetime income
While it's true that claiming Social Security at 62 will result in a much lower monthly benefit, it could actually result in a higher lifetime benefit. This won't happen if you live a notably long life, but if you pass away at an earlier age than most seniors, you'll come out ahead financially by filing early.
Say you're entitled to a monthly benefit of $1,600 at an FRA of 67. If you file for Social Security at 62, that benefit drops to $1,120. However, if you wind up passing away at age 75, which is fairly young given today's life expectancies, you'll end up with about $21,000 more than you would've collected had you waited until FRA to file.
3. You've earned an early retirement
Maybe your health is outstanding, and you recognize that signing up for Social Security at 62 will likely result in a lower lifetime payout for you. It could still pay to claim benefits early if doing so helps you enjoy the retirement you've worked hard for.
If you're approaching your senior years without much savings, then a hit to your monthly benefits could be brutal. But if you've stashed away enough money to cover your living expenses and will be using your Social Security income for leisure and entertainment only, then you might as well claim those benefits while you're a bit younger and are in better shape to make the most of them. Of course, this isn't to say that your health will decline dramatically between age 62 and your full retirement age. But it does stand to reason that the younger you are, the more energy you're apt to have to travel, play golf, or do whatever it is you're hoping retirement will allow for.
The decision to claim Social Security isn't an easy one -- especially when you're talking about filing at 62 and reducing your monthly benefit substantially. But before you assume that signing up early is a terrible move, consider the upside. You may find that 62 is actually the perfect age for you to start collecting that money.
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