There’s a good chance Social Security will end up providing you with a decent chunk of your retirement income. Ideally, those benefits won’t be your only income source during your senior years. But it’s not unreasonable to assume you’ll rely on them heavily.
It’s for this reason that seniors are advised to file for Social Security strategically. You’re entitled to your full monthly benefit, based on your personal wage history, once you reach full retirement age, or FRA. FRA kicks in at age 66, 67, or somewhere in between, depending on the year you were born.
But you don’t have to wait until FRA to start receiving benefits. You can sign up for Social Security as early as age 62.
For each month you file for Social Security before reaching FRA, your benefits will be reduced. File at 62, and you’re looking at a reduction of 25% to 30%, depending on your precise FRA.
That’s a notable hit — one that could make it so money is tight in retirement. But despite that consequence, here are a couple of reasons why signing up for Social Security at 62 could pay off.
1. You’ll end up with a higher lifetime benefit if you don’t live very long
While filing for Social Security at age 62 will result in a lower monthly benefit, it may not result in a lower lifetime benefit. In fact, if you end up passing away at a relatively young age, filing at 62 could mean collecting more money from Social Security all in.
Of course, without a crystal ball, it’s impossible to know how long you’ll live. But if you have health issues as retirement nears, you may want to consider filing a benefits claim as soon as you’re allowed to.
2. You’ll have the option to leave a miserable job sooner
Unfortunately, many people get stuck in demanding, stressful jobs that negatively impact their health. It’s one thing to be in that situation in your 20s and 30s, when you’re still paying your dues in the labor force and may have more energy to cope with long hours or tough working conditions. But it’s another thing to deal with that in your 60s.
If your job is miserable, to the point where it’s harming your health, then your goal should be to get out as soon as you can. And Social Security might make that possible. If you start collecting benefits at 62, that could buy you the option to move over to a job that pays less — but is also far more manageable.
What could claiming Social Security at 62 do for you?
If you’re nearing retirement with little savings, then there’s a clear risk in claiming Social Security at 62. But if your nest egg is decent-sized, then it could make sense to sign up as early as you can — despite the notable hit to your monthly benefits that might ensue.
If you decide that you’re too nervous to file for benefits at age 62, a middle-ground solution may be best — one that has you filing at a later age than that, but before FRA. Signing up at age 65, for example, will result in a lower benefit, but not the same extreme hit that filing at 62 will result in. And that way, you still end up with your money sooner.
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