For some, the decision to take Social Security is a challenging one: You'll need to consider a variety of factors in coming to a final determination. In certain cases, it may make sense to claim benefits early — in advance of full retirement age (FRA) — to lock in a better deal for you and your family. It's also smart to consider both financial and nonfinancial factors when it comes to filing your claim for benefits.
Let's review three times you should — and shouldn't — consider taking Social Security benefits early.
When you should take benefits early
1. You need the money
In the simplest terms, take Social Security if you need to take Social Security. Despite the potential to lock in more if you delay your claim, there's a fairly clear argument that if you need the money to pay for necessities, you shouldn't hesitate in filing your claim. Keep in mind, however, that you'll receive a check equal to 30% less than your primary insurance amount would allow if you waited until FRA to file your claim.
2. You're in poor health
The break-even age for claiming benefits early is generally in the late 70s or early 80s; in other words, unless you live beyond these ages, you'll almost certainly receive less money by filing for Social Security early.
With that said, if you have a shorter-than-normal life expectancy, claiming benefits as soon as possible does make sense. Locking in a guaranteed income floor at 62 can make sense in this context, particularly if ill health is preventing you from earning an active income.
3. You badly want to retire
Life is not all about maximizing financial return. There are, without question, numerous instances in which working is just no longer appealing — especially after 30 or 40 years.
If this applies to you, consider taking benefits earlier than you would otherwise. If you can make it work with the rest of your financial picture, retiring at 62 might be your best option, all things considered.
When you should wait to claim benefits
1. You enjoy your work
If you aren't entirely appalled by getting up to work every day, continuing to work can make a lot of sense in your early-to-mid 60s. Research indicates that working in the early years of retirement can not only help secure your long-run financial future, but it can provide social benefits that contribute to a greater sense of well-being.
To the extent that you can add (or continue) meaningful engagement with others, it's wise. Practically, if you're still working, Social Security checks become less important in the short run.
2. You have substantial savings
Assuming you've taken the necessary steps to grow your retirement accounts (like 401(k)s and IRAs) throughout your working career, jumping at Social Security as soon as you're eligible isn't an emergency. If you've decided to dial down your active income in your early 60s, you can supplement with portfolio withdrawals until your higher benefit checks kick in after you've hit FRA. Substantial investments, predictably, provide valuable security as you consider your retirement plan.
3. You want the highest monthly check
Recall that by delaying your benefit claim until FRA or later (up to age 70), you'll lock in a much larger monthly check than if you were to claim benefits at 62. For 2022, assuming you've earned the maximum taxable wage base in your 35 highest years of earning, you'll receive $4,194 per month at age 70 as opposed to $2,364 per month at age 62 — quite a substantial difference.
A complex decision
The decision to claim Social Security should be taken in the context of your total financial picture, as well as your family situation, life expectancy, and other nonfinancial factors. Regardless of your choice as it relates to the timing of your claim, be sure you've given it adequate thought, and don't be afraid to ask for help from a qualified professional if necessary.
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