Should you start receiving Social Security benefits as early as possible—i.e., at age 62?
That’s the question we want to tackle here.
First, a few important details.
Social Security considers “full retirement age” as being 66 for people born from 1943 to 1954.
For Baby Boomers born from 1955 to 1960, “full retirement age” increases by two-month intervals—66 and 2 months (for those born in ’55), 66 and 4 months (for those born in ’56), 66 and 6 months (for those born in ’57), etc.— until it reaches 67. For everyone born in 1960 and later, that (i.e., 67) is considered “full retirement age.”
However, Social Security will let you start receiving reduced Social Security benefits prior to your full retirement age—starting at age 62.
Don’t miss that significant detail. You will be getting a discounted amount. The fact that Social Security is giving you your money “early” means they will reduce the payout.
But even though the amount will be less, there are still some compelling reasons you might want to consider “turning on” Social Security at age 62. Here are 11:
1. If you are married, have the lower Social Security benefit, and are much younger than your spouse…
The life expectancy tables suggest that you will live longer than your spouse and will at some point turn on the Social Security spousal benefit when your spouse dies. In that case, it may make sense for you to go ahead and turn on your benefit early to start collecting what you can now because growing your benefit won’t make a whole lot of difference, especially when you’ll eventually be turning on the spousal benefit.
2. If you are concerned about the future of Social Security…
If you are worried that Social Security is going to run out of money by 2035 (the current estimate) or somehow stop being a viable program, then it makes sense that you would want to turn on your benefit early to collect it while you can.
Politicians are always talking about making changes to Social Security to keep it viable. Those changes are most likely going to be negative. So, if you feel you want to collect “what you can while you can,” turning on Social Security at 62 may be an option for you.
3. If you think that by waiting too long to build up a higher benefit, you might die before receiving anything…
I know many people want to delay benefits so they can maximize the amount of money they’ll receive each month. Let’s say you’re planning to wait until age 70 so you can claim the largest possible benefit. But if you die before your 70th birthday, you won’t receive any benefits.
Now, obviously, nobody knows when they’re going to die. But you can look at your health and your family history and come up with a reasonable guess. This may be a reason to turn on Social Security earlier so that you can begin receiving a benefit. Waiting too long and potentially not receiving any benefit at all may prompt you to begin receiving your Social Security benefits early.
4. If you have a debt that you need to pay off…
Depending on the debt you’ve accrued and the interest rate that you’re paying, it may make sense to get the extra money now to pay down your debt. Again, by turning on Social Security earlier, you’ll get less each month than you would if you waited until full retirement age. But if you can knock out debt—especially high-interest-rate credit card debt—this may be a good reason for you to turn on Social Security early.
5. If you can’t work anymore…
You may have had plans to work all the way until age 70 and then turn on Social Security. But for whatever reason, you can’t work anymore.
Maybe you got laid off. Maybe you have a health issue. But whatever the reason is, you just can’t work anymore and you need to turn it on early to make ends meet. This may be less about your choice, and more about the fact that you just need to turn it on. That may be a good reason.
6. If you’re working part-time, with earnings below the earnings limit…
For 2023, if you were under the full retirement age, then you can earn up to $21,240 a year and not lose your Social Security. If you earn more than that, then they give you a fancy two-for-one special. That is, for every two dollars you are above that income limit you will lose one dollar of your Social Security Benefit.
Once you’ve hit your full retirement age, you can earn all you want and Social Security won’t reduce your benefit. If you’re only working part-time and you’re confident you’re going to be underneath that limit, you may want to turn on your Social Security before full retirement age.
7. If you already have your 35 highest earning years…
Your Social Security benefits are based on the 35 years of earning that you had the most compensation. If you’ve already had 35 years of peak earnings—and maybe you’re only working part-time and therefore not surpassing those peak earnings numbers—you may want to turn it on early.
There is this, however. If, at age 62, you only have 30 years of compensation, they’ll be adding five years of zeros to your average. That may make you want to work longer or delay turning on Social Security. But if you already have 35 years of high earnings, it may make sense for you to turn on your benefits early.
8. If you want to receive it and invest it (and think you can do better than the increases you’ll get from Social Security)
From full retirement age to age 70 there’s an 8% per year increase. That’s pretty strong! However, as we said earlier, if you never turn on Social Security because you die prior to receiving any benefits, then your beneficiaries will get nothing. If you think that by turning it on early and investing it, you think you can earn more, this may be a strategy.
Another plus with this strategy is that if you die, the money in your investment account will be left to your beneficiaries. However, again, if you die never having turned on Social Security, then nothing will be left for your beneficiaries. For some, that may be reason enough to do it right there.
9. If you are single and you have health issues…
You can do the math and figure out the break-even point of delaying Social Security. But if you’re not sure that you’re going to live that long, then turning it on early and getting the benefit now may make sense for you.
10. If your spouse is the higher earner and has health issues…
Since they are the higher earner, that means their Social Security benefit is going to be higher than yours. If they’re also in poor health and potentially have a shorter life expectancy, that means their higher benefit will most likely become your benefit when they pass away.
If that’s the case, there’s not much reason for you to delay receiving your benefit. You may want to go ahead and turn it on and collect Social Security as long as you can before your benefit gets upgraded to the survivor’s benefit at the passing of your spouse.
11. If your spouse is the lower earner and older than you…
Let’s say that your spouse is at full retirement age and can turn on their own Social Security and get $500 per month. Let’s say that you are age 62 and if you turn on your benefit it will be $1800 a month. By turning on your benefit, it now allows them to receive a spousal benefit and at their full retirement age, they would be able to receive $900 a month based on your benefit, as opposed to $500 a month based on their own benefit. Allowing the older, lower earner to start the spousal benefit may make sense for you to go ahead and file earlier.
Everybody’s situation is different. This is one of the huge benefits of working with a financial planner. He or she can show you different strategies for turning on your Social Security. Depending on your situation, your monthly income, the assets that you have—all these things will affect your decision of when to turn on Social Security.
At Christy Capital Management, we do comprehensive financial planning with and for our clients. We show them the monthly income they have coming in during retirement, and we show the estimated monthly expenses going out.
Some people don’t have a choice. They have to turn in Social Security just to make ends meet. Other people do have a choice, and the only question is when is the best time to turn on Social Security.
If you’d like to work with a financial planner who can help with this question— reach out to our team Christy Capital Management.
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We’d love to hear from you. We can help you with decisions about Social Security or other retirement issues.