Filing for Social Security at 62 means facing the largest reduction in benefits possible. Here’s why I now think that might make sense.
One nice thing about Social Security is that you can choose when to sign up. And if you’re willing to take a financial hit, you can get access to your benefits early.
Medicare doesn’t work that way. Medicare coverage can’t start until age 65, and you can’t buy your way into it earlier by paying higher premiums.
I used to think I’d claim Social Security as late as possible to lock in the highest monthly benefit possible. But these days, I’m leaning toward filing for benefits early despite the fact that it’ll result in a reduced payday.
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What my options look like
I don’t know exactly what monthly benefit to expect from Social Security. Sure, I can get an estimate online. But because I plan and hope to work full-time for a few more decades, it’s hard to get a super-accurate read on that number.
What I do know, however, is that based on my year of birth, I’m eligible for my complete monthly Social Security benefit based on my career wage history at age 67. This is known as full retirement age.
I also know that if I delay my Social Security claim past full retirement age, I can boost my monthly benefit by 8% a year until age 70. This gives me the opportunity to collect a much higher check.
There’s also the option to claim Social Security before full retirement age. The earliest age to sign up is 62. But the further away you are from full retirement age when you file, the more of a hit your monthly benefit takes.
For this reason, I used to tell myself there was no way I’d sign up for Social Security at 62. For years, age 70 was my go-to filing choice since it would lead to the highest monthly payday. At times, I contemplated putting in my claim at age 67, too. It’s only recently that I’ve started thinking about taking benefits at age 62, and there’s a big reason for that.
Why I’m considering an earlier filing now
Nothing about my retirement plans has changed over the past few years. I still hope to settle down in a quiet, somewhat remote area, spend time in nature, travel a bit, and, provided that robots don’t force me out of a job, continue to work in some shape or form.
Nothing about my savings habits has changed, either. For years, I’ve been maxing out my retirement account and saving beyond its allowable contribution limit by putting additional funds into a taxable brokerage account. The only thing that’s shifted a bit is that a couple of years ago, my family got new health insurance that’s compatible with a health savings account (HSA). So, now, I aim to max out that account, too.
My financial strategy has always been to try to save enough for retirement that my Social Security benefits won’t matter. Because the program’s future is so uncertain (ahem, benefit cuts), I don’t want to put myself in a position where I’m reliant on those monthly checks to do things like buy groceries or put gas in my car (whether gas cars will be a thing at that point is another story).
But while I’m planning to stick to my strategy, I’ve realized that claiming Social Security early doesn’t actually stray from it.
My plan has always been to use Social Security for bonus cash — to fund travel experiences or pay for hobbies. Claiming benefits at 62 should still allow me to do that.
Granted, if I were to file at 62, I’d be looking at a smaller monthly paycheck than at full retirement age. But an early filing also gives me access to my Social Security benefits sooner. And because I want to use that money for trips and entertainment, I’d rather have it at a slightly younger age.
It’s not a given that I’ll have better health at age 62 than 67. But it’s fair to assume that being five years younger could mean having a little more spring in my step and, perhaps, a little more cartilage left in my knees (those years of distance running didn’t do my naturally unathletic body any favors).
So, the way I see it, if I’ve saved my way into a retirement that’s not dependent on Social Security, why shouldn’t I get my hands on that money as early as possible, even if it means settling for less each month?
Look at the big picture
You may be set on claiming Social Security either on time (meaning full retirement age) or late for boosted benefits. That strategy may be optimal for you based on your goals and broad financial picture. But before you write off the idea of filing for Social Security at 62, think about the upside and what it might mean in terms of meeting your retirement goals.
I wouldn’t recommend an early filing like that if you’re approaching retirement with a mere $50,000 nest egg, or even if you have decent savings but know you’ll still need Social Security to help cover some basic costs. But if you’ve saved well for retirement and have the flexibility to collect your money early, it may not be such a terrible idea — even though I used to be convinced it was for me.