Age 62 is the earliest point at which you can claim Social Security. And if you want your full monthly benefit based on your earnings history, you’ll need to wait until full retirement age, or FRA, to get it. That won’t kick in until age 67 if you were born in 1960 or later.
Meanwhile, for each month you sign up for Social Security ahead of FRA, your monthly benefit will be reduced. File at age 62 with an FRA of 67, and you’ll be looking at a 30% hit to your Social Security income.
To be clear, it’s not like your full monthly benefit will be reinstated once you reach FRA. If you file early and slash your benefit, you can expect those lower monthly payments for life.
Clearly, that’s a major drawback to filing early. But in spite of that, there’s one situation where claiming Social Security at age 62 really is a smart move.
When you need to preserve your retirement savings
Some people plan to work well into their late 60s or even 70s, only to have those plans thwarted. The reality is that you never know when health issues or layoffs might force you out of a job. If that happens at a time when the stock market is down, it could put you in a tough financial spot.
Such is the case today. Stock values are down across the board, so those who cash out investments right now could end up taking serious losses in their portfolios that hurt them down the line. If you’re forced to wrap up your career during a period like this, claiming Social Security early could be your ticket to preserving your retirement savings and making sure you don’t lock in losses that increase your chances of depleting your nest egg in your lifetime.
You may be thinking, “But if I claim Social Security early, my benefits will take a hit instead of my portfolio.” And that’s true. But if investment values are down in a very big way, the hit you take in your portfolio is one you may not be able to afford.
One thing to keep in mind is if you’re an average earner, you can expect Social Security to replace about 40% of your pre-retirement income. But most seniors need roughly twice that amount of income to maintain a decent retirement lifestyle. So you can’t run the risk of draining your retirement account by having to take withdrawals at the worst possible time.
That’s why it’s a good thing that Social Security gives seniors options when it comes to choosing a filing date. Claiming benefits at age 62 may not be ideal — especially if that was never your plan and you were hoping to file at FRA or even beyond for a higher monthly benefit. But if it’s between that and running the risk of depleting your nest egg, you may want to choose filing early as the lesser of two evils.
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