How would you react if someone told you you could have a whole lot of money right now, or get stuck and wait a few years and get even more money in exchange? It is a dilemma that seniors face all the time when they reach the age of eligibility for social security.
The earliest age to sign up Social Security benefits are 62. However, seniors are not entitled to their full monthly benefit based on their respective earnings history before full retirement age (OFF), which does not start until 66, 67, or somewhere in between, depending on a person’s year of birth.
For example, if you are eligible for a monthly social security benefit of $ 2,000 to an FRA of $ 67, that means applying by 62 to cut the benefit to $ 1,400 – for life. It’s a big financial hit to take.
But to be clear, that does not mean that claiming social security at age 62 is automatically a bad move. In fact, in these three situations, it makes a lot of sense to file as early as possible.
1. You really, really hate your job
One thing is to join a job you can not stand when you are in your 20s or 30s and have the energy to handle a nagging boss or a demanding work schedule. But once you reach the early 60s, your patience for such events can quickly become thinner. And if you’ve spent your whole life working, you really deserve a break at some point.
Demanding social security at 62 can be your ticket to escaping the brink of a bad job and going out to find a new one. If you have the money from Social Security coming in, you may be able to cope with a pay cut. That way, you have a chance to keep growing pension savings without having to be miserable day in, day out.
2. You have no choice but to leave your job
Maybe you do not hate your job at all. Maybe you love what you do and would stay in your business well into the 70s if the choice was yours. But if you are forced to leave your job, whether it is due to cuts, health problems or some other reason, then claiming social security at 62 may be your ticket to staying afloat financially.
Applying for benefits early can also help you prevent a scenario where you are forced to replace a good job with a terrible job. It is an unfortunate fact that older job seekers often struggle to get hired because of perceptions of their outdated skills and impending retirement. And while it is largely illegal not to hire someone based on age, it is also a difficult thing to prove.
So let’s say your business has to cut back on its staff, and now your only choice to continue working is to take on a poor, dead-end role. Is it really something you should have to do in your 60s, after putting decades into the workforce? If you claim social security as a 62-year-old, you can potentially avoid that fate when mapping out your next steps.
3. You have saved enough to archive at any age you choose
The danger of requiring social security at 62 is to cut back on your benefits permanently and fight financially in light of that. But what if you have maxed out your 401 (k) in the last 30 years and were a savvy investor?
It could be that you are now sitting on millions of dollars as a result. And while you still need to be careful when making payouts, to make the money last, you may also be able to claim social security whenever you want.
Although there is a clear disadvantage to applying for Social Security at 62, there are several scenarios where it makes sense. Think about your circumstances to see if it is a wise move for you to claim benefits so early.