I’m not too proud to admit that I’ve had a change of heart.
Social Security is a more flexible program than some people expect. In fact, you get a pretty long window to sign up for benefits, assuming you’re eligible for a monthly payday in retirement.
The earliest age to sign up for Social Security is 62. And you’re entitled to your full monthly benefit based on your personal wage history when you reach full retirement age, which is 67 for anyone born in 1960 or later.
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What this means is that signing up between ages 62 and 67 results in a reduced benefit. And the earlier you file, the more of a reduction you face.
There’s also the option to delay Social Security past full retirement age for a boosted benefit. That incentive runs out at age 70, though.
If you would have asked me four or five years ago what I thought about claiming Social Security at age 62, I would have told you it’s a terrible idea. But I’ve since changed my tune.
Why I’m now on board with an earlier filing
A big reason I used to think filing for Social Security at 62 was disastrous is that many Americans lack retirement savings in a very big way. Earlier this year, Prudential found that 55-year-old Americans have median retirement savings of less than $55,000. People in that situation probably can’t afford to slash their Social Security benefits by claiming them early.
But I also recognize that not everyone is in that boat. There are plenty of people who are nearing retirement age with millions of dollars socked away for their senior years. And if you’re someone in that situation, I think claiming Social Security at age 62 will work out just fine for you.
Sure, you’ll be slashing a guaranteed income stream for life. But you may also be buying yourself the option to retire a bit earlier, or to enjoy certain hobbies and experiences when you still have the energy and good health for them.
And even if you’re not sitting on a boatload of savings, you might still do just fine by claiming Social Security at 62 if you manage your expenses well. A reduced benefit might make money tight if you insist on living in a large home and driving higher-end cars in retirement. But if you’re OK with downsizing your home and living somewhat frugally, you might get by without stress even if your monthly income is limited to a smaller benefit and a modest withdrawal from your retirement plan.
It’s also worth noting that filing for Social Security at 62 could work out well financially for you if you don’t end up living a very long life. Put another way, you may end up with a larger lifetime benefit from Social Security if you sign up at 62 but pass away in your 70s, as opposed to living until your 80s or 90s.
And since no one knows how long they will live, getting your benefits as early as possible might give you more peace of mind, even if it means having them reduced.
A shift in mindset you may want to adopt
Maybe you’re someone who always assumed you would claim Social Security at full retirement age or later. You should know that it’s OK to change your mind due to a variety of circumstances.
It may be that you’re nearing your 62nd birthday and your working environment has changed. If your new management team is difficult to deal with and your stress load has increased exponentially over the past few years, then that alone could be a good enough reason to take benefits at 62 and get the heck out of that situation.
You could always opt to work part-time from there. But with those benefits hitting your bank account each month, you may not have to rely on a salary from a job that’s making you miserable.
This is just one example, but the point is that it’s not necessarily a terrible idea to sign up for Social Security at 62. And even if you don’t end up with more money from the program in your lifetime by going that route, you might benefit from buying yourself more flexibility at a stage in life when you need it.
