One of the biggest financial decisions you’ll make in retirement is when exactly to start claiming Social Security. Most people automatically consider their “full” retirement age of 65 as the target date. But did you know you can actually start collecting benefits as early as 62?
While there are unquestionable advantages to waiting, depending on your circumstances, claiming early might be the more clever financial move. It’s not always the massive mistake that many assume it is! There are many factors to consider including your health, income needs, and retirement plans.
Let’s start with some common myths around Social Security and consider why, for some people, claiming those checks sooner makes perfect sense.
1. “Early Benefits Are Drastically Smaller”
Yes, your benefit shrinks each month you claim BEFORE your Full Retirement Age (FRA). But that reduction isn’t as devastating as you might think. Depending on your FRA, it could be as low as a 6-7% reduction for each year claimed early.
Run the actual numbers based on your specific situation! That slightly smaller payout, collected over MORE years, might outweigh the bigger monthly check you’d receive by waiting. This is where life expectancy plays a big role.
2. “I’ll Get Penalized If I Work While Taking Benefits”
This is only true for those earning above a certain threshold BEFORE they reach their FRA. Those limits disappear once you hit that age. This means you can collect your benefit AND have unlimited income without penalty.
This can be a great “bridge” strategy for semi-retirement. Reduced Social Security and part-time income might be the perfect way to gradually scale back your workload without making drastic lifestyle cuts.
3. “Once I Start, I’m Locked In”
Not entirely true! During the first 12 months of claiming, you have the option to “withdraw” your application. You’ll need to repay the benefits you already received, and it’ll be as if you never started them in the first place.
Think of this as your “do-over” if circumstances change. Maybe you claim early, then get an unexpected (and lucrative) job offer. This rule allows your benefit to continue to grow by delaying.
4. “My Benefits Will Disappear if the Program Goes Broke”
While Social Security DOES face long-term funding challenges, experts agree there are ways to fix it. Benefits might need to be reduced slightly in the future, but the chances of the program disappearing entirely are slim.
Keep yourself informed on proposed program reforms, as this may factor into your decision. But don’t let exaggerated fear-mongering scare you into delaying benefits if taking them early makes more financial sense for your immediate needs.
Claim your benefits early if…
Now let’s address some of the less obvious but very important reasons why early Social Security might be the best financial strategy tailored to your individual circumstances:
1. Your Health is in Question
This is a sensitive topic, but a crucial one. If you face health issues that make it less likely you’ll reach average life expectancy, collecting more years at a reduced amount could maximize the total benefit you receive over your lifetime.
This requires honest self-assessment. Look into your specific condition, and consider your family’s longevity history. It’s a difficult conversation to have, even with yourself, but it makes for informed decision-making.
2. You Need the Income NOW
Life throws curveballs – job loss, mounting debt, unexpected healthcare costs, or needing to financially help adult children. If dipping into retirement savings early triggers penalties, taking Social Security might be the lesser of two evils.
Compare the total benefit collected over a lifetime starting early vs. holding out for the bigger check but draining your savings (and losing out on potential investment growth) in the meantime. Do the math!
3. Your Spouse Has a Much Higher Benefit
If there’s a large disparity in your benefits, the lower-earning spouse claiming early can be quite strategic. It provides some household income, while the higher earner’s benefit continues to grow by delaying.
Upon the higher earner’s death, the surviving spouse inherits the larger of the two benefits. By maximizing that benefit through strategic claiming, you increase your long-term financial security as the surviving spouse.
4. You Hate Your Job
Toxic workplaces take a toll on both physical and mental health. If retiring early is financially feasible, those reduced Social Security checks might be worth it to buy back your sanity– a truly priceless trade-off!
That “freedom money,” even a smaller amount, opens possibilities. Maybe it allows you to downsize your lifestyle or pursue a lower-paying, more fulfilling job. Walking away from that soul-sucking grind suddenly becomes achievable much earlier than you expected.
5. You’re an Entrepreneur
Starting a business later in life comes with inherent financial risk. Early Social Security checks can lessen that pressure. That guaranteed income stream gives your venture crucial room to breathe during its early stages.
Being self-employed often means limited retirement savings options. This makes Social Security, even if reduced, even more vital to your long-term financial well-being. Consider it as an alternative to a traditional company pension plan.
6. You Simply Want to Enjoy Your Retirement
Travel, spending time with grandkids, or a hobby you’re passionate about—if your overall nest egg allows it, don’t feel guilty about maximizing the years when you’re healthy and active enough to fully enjoy the rewards of your hard work.
Remember, money is a tool, not the goal itself. Sometimes, prioritizing meaningful experiences over a slightly larger future bank balance is the key to a truly fulfilling retirement.
The Flip Side…
Let’s not pretend early Social Security is the best move for everyone! There are definitely compelling reasons why maximizing your monthly benefit by waiting longer makes sense for many retirees. Here’s the case for playing the long game:
1. You’re Poised to Outlive the Averages
If you’re in excellent health and have family members known for living long lives, the odds are good you might surpass average lifespans. In that case, waiting for those bigger checks can lead to significantly more money collected over your lifetime.
Consider your lifestyle, too. Do you make healthy choices, exercise regularly, and prioritize preventative healthcare? Those factors increase longevity, making delaying Social Security a smart financial bet.
2. You Need to Maximize Spousal and Survivor Benefits
If you’re the higher earner (or have a similar benefit to your spouse), those “delayed retirement credits” boost your benefit by 8% per year you wait past your FRA. This makes a noticeable difference in what your surviving spouse could inherit.
This is especially important for couples with large age gaps. Protecting the financial security of the younger spouse, should you predecease them, becomes paramount, and your Social Security claiming strategy plays a major role in that.
3. You Plan to Keep Working for Many More Years
If your current income easily covers expenses AND still allows you to save aggressively for retirement, you really don’t NEED that Social Security money yet. Delaying while continuing to contribute to your 401(k) or IRA is a powerful wealth-building combination.
Consider those delayed Social Security benefits as a guaranteed “raise” once you do fully retire, potentially allowing you to comfortably draw down your other investment accounts at a slower, more sustainable rate.
4. You Want Protection against Inflation
Social Security benefits include a Cost of Living Adjustment (COLA). However, it’s often based on past inflation, not real-time price increases. By delaying, you lock in a higher baseline, making those annual COLA adjustments even more impactful.
While nobody can predict future inflation, if the current economic climate has you worried about your purchasing power eroding over time, delaying benefits gives you a stronger “shield” against that risk.
5. You Lack Other Sources of Guaranteed Income
If you don’t have a pension, or your investment portfolio is modest, that monthly Social Security check can feel like your lifeline. Maximizing its size offers the most financial stability, especially as you age.
Market downturns are stressful enough, without ALSO worrying whether your retirement withdrawals will outlast your lifespan. A bigger Social Security benefit provides a layer of security against needing to rely too heavily on investments during down markets.
12 Purchases That Aren’t Worth Making in Retirement
Retirement marks a major lifestyle shift. The thrill of newfound freedom after working all those years is exhilarating, but it’s vital to reconsider how you spend your hard-earned savings.
After a lifetime of work, you deserve to enjoy yourself—but not at the expense of your financial security.
12 Purchases That Aren’t Worth Making in Retirement
20 Things Poor People Waste Money on, According to Suze Orman
If you’ve ever watched her show, you know Suze Orman pulls no punches. She’s all about calling out bad money choices, urging people to take control of their financial destinies and ditch those pesky spending habits that derail progress. While her advice can be blunt, she aims to empower folks to build wealth and protect their financial futures.
It’s important to note, Suze Orman gets flak sometimes for being too harsh. She’s not shaming people, but highlighting how certain expenses can sabotage big goals like homeownership or a comfortable retirement.
20 Things Poor People Waste Money on, According to Suze Orman
With an honors degree in financial engineering, Omega Ukama deeply understands finance. Before pursuing journalism, he honed his skills at a private equity firm, giving him invaluable real-world experience. This combination of financial literacy and journalistic flair allows him to translate complex financial matters into clear and concise insights for his readers.
