You can start collecting Social Security benefits as early as age 62. However, your benefit amount will be reduced if you start collecting payments before your full retirement age, which is generally age 66 or 67.
If you take Social Security distributions beginning at age 62, you’ll get 25% smaller payouts if your full retirement age is 66 and 30% smaller payouts if your full retirement age is 67. Waiting to claim Social Security often pays off in the long run, but there are also several reasons to start Social Security payments at the earliest possible age.
Common reasons to take Social Security at age 62 include:
1. Health issues.
2. You need extra income now.
3. Get out of debt.
4. Leverage the stock market.
5. Coordinate payments with a spouse.
Health Issues
If you’re experiencing any serious health problems and aren’t expected to live beyond the next few years according to your doctor, taking Social Security can be a good idea. “If you are 62 and a medical condition makes you unlikely to live to age 75, then you may be better off filing at 62 so you collect as many monthly benefit checks as you can,” says Glen Goland, a senior wealth strategist at Arnerich Massena, a financial advisory firm in Portland, Oregon.
However, if you are married and receive significantly larger Social Security payments than your spouse, you might want to consider delaying Social Security in order to leave a bigger survivor’s payment to your spouse.
You Need Extra Income Now
If you have experienced a financial emergency, such as a layoff or major expense, and are at least age 62, it can make sense to sign up for Social Security early. You could also use the funds to launch your next phase of life. “If you need the money to start up a new business venture, then taking cash out of Social Security can be a good idea,” says Jody D’Agostini, a certified financial planner with Equitable Advisors in Morristown, New Jersey. “This financial boost may help you launch your next chapter of earnings, as it can support you until you get off the ground.”
If you recoup some of the money, you can also repay your Social Security benefit within the first year without penalty, and that will allow your future Social Security benefit to accumulate.
Get Out of Debt
If you have debt that needs to be repaid, and you are unable to increase your earnings or take money from savings, consider taking Social Security payments sooner. “That’s especially the case if you have mushrooming interest charges,” D’Agostini says. “I would, however, try first to consolidate the debt and look to lower interest charges.”
Invest the Proceeds
Your Social Security benefit is guaranteed to increase by 8% for each year of delayed claiming between your full retirement age and age 70. If you think you can beat that amount through other investments, you could receive more abundant financial rewards by taking Social Security early and investing the proceeds. “You could take your Social Security payments early, invest the money in the stock market and beat that 8% yearly return,” says Levon Galstyan, a certified public accountant at Oak View Law Group in Glendale, California. However, it’s important to note that Social Security payments are guaranteed to increase over time, while stock market investments could decline in value.
Coordinate Payments With Your Spouse
If you’re married and both eligible for Social Security payments, it often makes since for the higher earner to delay claiming Social Security and the lower earner to collect sooner. It’s generally most beneficial to the couple to take steps to maximize the higher earner’s benefit.
“It’s likely that your spouse’s Social Security benefit will be greater than yours if their earnings were higher than yours,” says Devin Carroll, owner of Carroll Advisory Group in Texarkana, Texas. “If they’re also in poor health and have a shortened life expectancy, that means the higher benefit they receive will most likely become your benefit when they pass away.”
Married couples have the option to claim spousal payments, which can be worth as much as half of the higher earner’s benefit. The surviving member of a married couple will also receive an amount equal to the higher of the two Social Security payments a married couple received. “If that’s the case, there’s not much reason to delay your benefit for years down the road just so you can get a higher benefit for the rest of your life, because you’ll most likely start getting that survivor’s benefit at some point in the future,” Carroll says.
It’s important to run the numbers for your specific situation when determining the best ages to claim Social Security benefits as a couple. “Much of your decision will come down to the individual factors present, such as the type of savings you have and other sources of retirement income,” Carroll says. “Retirees should compare all the factors together to find out whether filing early or later gives a better overall result.”
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Reasons to Take Social Security Early At Age 62 originally appeared on usnews.com
