4 reasons to claim social security as early as possible – Community News
Social Security

4 reasons to claim social security as early as possible

The decision to take Social Security is a big one, regardless of your financial status. That’s why it’s a good idea to carefully consider why you want to claim your monthly retirement benefits as soon as possible.

Here we’ll look at four circumstances where taking Social Security sooner rather than later makes a lot of sense.

1. You need (or want) the money

It really is that simple: If you need the money to cover your monthly retirement expenses, the sooner you apply for benefits, the better. While you can expect to receive approximately 30% fewer monthly benefits than if you waited until full retirement age (FRA), you will immediately begin receiving payments that can help cover short-term costs.

For a number of reasons — including those related to your health — working into your sixties may not be an option. At the same time, paying your fixed costs is a fact. If you’re not on a million dollar investment portfolio, don’t hesitate to claim benefits if you need (or want) them.

Two elderly people looking at laptop.

Image source: Getty Images.

2. You have questions about the lifespan

This requires an individual break-even analysis to fully calculate, but there’s no point in waiting to claim benefits if you don’t expect an above-average longevity.

In an example, suppose you took Social Security at age 62 and received $1,600 per month; Also imagine that if you stayed until age 67 you would receive $2,500 per month. In general, you would have to live to nearly 80 to receive the same amount in both scenarios. Unless you really live into your late 70s, you’ll get a head start by claiming benefits earlier.

If you’re concerned about your longevity, taking Social Security once you qualify may be a smart choice. You want to start the flow of benefits as early as possible, which is akin to cashing out your chips early to get Guarantee that you receive as much as you can during your 60s and early 70s.

3. You don’t plan to retire

If the Great Resignation of 2021 is any indication, there is a widespread reappraisal of work in terms of its place in everyday life. While it’s clear that you’ll receive less money if you claim Social Security benefits early, you may be trading a higher salary for a greatly increased quality of life from your early 60s.

The benefits of working in retirement are many; increased engagement, increased flexibility, and ongoing social engagement are some common ones. But the truth remains: Working after age 62 just isn’t a reality for many people. Furthermore, some people have decided that the value of more money can never replace time spent with grandchildren or spent on leisure activities. Sometimes the financially optimal choice doesn’t match life as it happens in real time.

4. You worry about the future of the SSA

It’s not a death knell for benefits, but there’s some evidence that the Social Security Administration’s (SSA) trust reserves will soon be depleted by 2033. If the reserves run out completely, the payments would still continue, but it is possible that people will get less money than if there were still a healthy reserve fund.

Projections estimate that continuing payroll tax income could cover 76% of benefits, so you won’t be left without retirement income even if trust reserves go to zero. what this is doing implying, however, is that the value of waiting for benefits may be lower than otherwise thought. If you can claim early and guarantee a steady stream of income, you could have a head start if your FRA benefits aren’t as “full” as you expected.

Think about your timing

This is not a recommendation to claim benefits early, but it is a reminder to think about when it makes sense to claim them, as your specific circumstances. No two financial plans are exactly alike, so it’s worth sitting down and carefully planning how you want to cover your expenses in the early years of retirement.

Retirement planning involves much more than money, so be sure to consider the non-financial puzzle pieces and weigh them properly. If you’re having trouble making a decision, look for a financial planner who is paid only to help you with your analysis.