I Initially Believed 62 Was an Unfavorable Age to Collect Social Security Benefits, but I Was Misguided. Here's Why.
I Initially Believed 62 Was an Unfavorable Age to Collect Social Security Benefits, but I Was Misguided. Here's Why.
Social Security offers more leeway than many people realize. You've actually got a substantial period to apply for retirement benefits, provided you meet the eligibility criteria for periodic payouts.
The youngest age to apply for Social Security is 62. At your 'full retirement age', which is 67 for individuals born after 1960, you become entitled to your full monthly benefit, based on your income history.
Between 62 and 67, filing for Social Security results in a reduced benefit. The earlier you apply, the more significant the reduction.
There's also the choice to postpone your Social Security benefits beyond full retirement age for a larger payout. This opportunity ceases at 70.
If I were asked about claiming Social Security at 62 a few years ago, I'd have argued against it. But my perspective has shifted.
Why I now endorse an early submission
I initially felt that filing for Social Security at 62 was a poor choice due to the widespread lack of retirement savings in the U.S. Earlier this year, Prudential reported that Americans aged 55 have median retirement savings of less than $55,000. For individuals in such financial situations, it's unlikely they can afford to reduce their Social Security benefits by claiming them early.
However, it's crucial to acknowledge that not everyone falls into this category. There are numerous people approaching retirement age with substantial wealth saved up for their golden years. For these individuals, I believe claiming Social Security at 62 is a reasonable option.
Of course, you'll be cutting a lifelong income stream. But in return, you may gain the opportunity to retire sooner or enjoy hobbies and experiences while you still have the energy and health to do so.
Even if you're not in a comfortable financial position, claiming Social Security at 62 might still provide benefits if you manage your expenses wisely. A smaller benefit might strain your resources if you insist on living in a large house and drive luxury cars in retirement. But if you're willing to downsize your home and adopt a frugal lifestyle, you may be able to live comfortably without facing financial stress despite a smaller benefit and fewer retirement savings withdrawals.
It's worth noting that filing for Social Security at 62 could also be financially advantageous if you don't live a long life. Essentially, if you pass away in your 70s after filing for Social Security at 62, you could potentially receive a larger total benefit from the program compared to waiting until your 80s or 90s to apply.
Considering no one knows the exact length of their life, claiming benefits as early as possible could offer added peace of mind, even if it means accepting a smaller benefit.
A perspective that may be worth reconsidering
Perhaps you've always assumed you'd claim Social Security at full retirement age or later. If so, it's worth noting that it's perfectly acceptable to change your mind based on various circumstances.
For instance, if you're approaching your 62nd birthday and your work environment has dramatically shifted, with a demanding new management team and increased stress levels, then those changes alone could provide a compelling reason to start receiving benefits at 62 and depart from that challenging situation.
Of course, you could always opt for part-time employment post-retirement. However, with the benefits hitting your bank account each month, you might not require a salary from an unpleasant job that's causing you unnecessary distress.
This example illustrates just one scenario, but the key takeaway is that filing for Social Security at 62 isn't necessarily a terrible idea. And even if you don't end up with more money from the program in your lifetime by taking this route, you might experience enhanced flexibility at a time in life when it's most needed.
In some financial situations, individuals with substantial retirement savings might find it beneficial to claim Social Security at 62, as this could allow them to retire earlier or enjoy their golden years without financial stress. Conversely, if you're not financially secure and choose to claim Social Security benefits early, carefully managing your expenses could still provide a comfortable retirement, even with a smaller benefit.