Your retirement planning likely includes getting income from the Social Security Administration, but when you start collecting Social Security benefits can have a big impact on your planning. The earliest you can collect is age 62, but you'll get more money if you delay your benefits past your initial Social Security eligibility. If you wait until after your full retirement age (somewhere between 65 and 67) to start collecting Social Security you can earn delayed retirement credits, which will increase your benefits even more.
You might think that waiting for bigger benefits is better, but that's not always the case. There is no definitive answer to when you should collect Social Security benefits, and taking them as soon as you hit the early retirement age of 62 might be the best financial move.
Last updated: June 25, 2021
1. You’re Planning Your End-of-Life Care
Your Social Security benefits stop paying at your death, so if you die prior to collecting benefits, you'll have missed out on benefits entirely. You need to figure out how to maximize your Social Security income, instead. For example, say you're planning to wait until age 70 so you can claim the larger monthly benefit. If you die right before your 70th birthday, you won't receive any benefits. It's very difficult to predict how long you'll live, especially if you're in good health now. However, if you are suffering from a terminal or serious illness, the increased monthly benefit for delaying Social Security might not be worth it.
2. You Have a Shorter Life Expectancy
The government incentivizes waiting to collect your Social Security benefits by giving you a larger monthly amount the longer you delay. For example, if you start collecting benefits at age 62 when your full retirement age is 66, your monthly benefit will be about 75% of your full-age benefit. So if you expected your monthly benefit to be $1,000 per month at 66, you would only receive around $750 at 62.
Although a larger monthly benefit might sound great, keep in mind that you'd have to wait four years to get that extra $250 per month. You would receive $36,000 during those four years at the reduced amount of $750 per month.
When you start collecting $1,000 at age 66, that extra $250 per month won't let you break even for 12 years compared to collecting early. If your health is declining and you don't expect to live until you're 78, you'll receive more in benefits during your lifetime if you start claiming as soon as possible.
3. You Need to Pay Down Debt
There are some debts you need to tackle before you retire. If you have high-interest debt, claiming Social Security early can help you pay the debt down. Depending on the interest rate you're paying, the 8% yearly boost to your benefits that you receive for each year you wait past full retirement age might not be worth the increased monthly benefit. Using the early benefits to reduce or eliminate your debt earlier could mean you'll be able to keep more of your benefits in the future.
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4. You Can’t Work Anymore
Even the best retirement financial plans and projections can go awry. For example, you might have planned on working until you're 70 so you could maximize your retirement benefits. If you get laid off at 62, however, and have difficulty finding another job, you might need to start taking your benefits just to get by.
Additionally, continuing to work in your industry simply might not be possible or healthy for you later in life. If your job requires manual labor, you might decide the risk of injury or other damage to your health isn't worth continuing to work. In this case, the healthier lifestyle you'll get by retiring early could outweigh the smaller monthly Social Security benefit.
5. You’re Only Working Part-Time
If you claim Social Security prior to your full retirement age while still holding down a part-time job, you might have your benefits reduced if your work income exceeds the annual limit. For 2021, if you are under full retirement age, your benefits go down by $1 for every $2 your income exceeds $18,960. If you reach full retirement age in 2021, your benefits go down by $1 for every $3 your income exceeds $50,520 prior to reaching full retirement age. If you're working part-time to help make ends meet, taking Social Security at 62 might make sense.
6. No One Else Is Relying on Your Benefits
In the event of your death, a surviving spouse, minor or disabled child can receive money from the Social Security Administration based on the amount of your benefits. For example, a surviving spouse can receive between 71.5% and 100% of your benefit amount, depending on the surviving spouse's age. A disabled child can receive 75% of your benefits each month even after you're gone.
If no one else can qualify for benefits based on your record, you might want to retire early because no one is depending on that money. If everything else falls into place and you meet the minimum Social Security retirement age, consider collecting your benefits early and enjoying life.
7. You Already Have Your 35 Highest-Earning Years
Your Social Security benefits are based on your earnings in the 35 years that you had the most compensation. If you're in your peak earning years, you could boost your benefits if you keep working a few more years and delaying your benefits. However, if you aren't going to increase your average earnings, such as if you're only working part-time or you've had to retire early, you won't miss out on the chance to boost your benefits with higher earning years. However, you'll still receive a smaller benefit for not waiting until full retirement age.
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8. You Expect Your Investments to Grow Faster Than the Increased Benefit
If you're the next Warren Buffet, it's possible you could do better taking Social Security early and investing the money than you could by waiting to take a larger benefit later. When weighing the best decision, consider the inflation rate, the rate your benefits increase and how much you can expect to earn in your portfolio. Given that benefits increase by 8 percent per year for each year you wait after full retirement age, however, it's hard to outperform that rate of increase in the market. These safe investments do have high returns.
9. You Want to Start a Business
Some people think of retirement as a time to relax, but you might see it as an opportunity to do things you couldn't do before, such as starting your own business. For example, you might have put off starting a business before because you were afraid you wouldn't be generating enough income. Social Security benefits could provide enough income to let you launch your business. And if your business is successful, the income it generates could be more than enough to offset the future reduction in benefits.
10. You’re Concerned Social Security Will Disappear
Some people are concerned about potential Social Security changes in the future, such as higher retirement ages, lower benefits or higher taxes on benefits. As a result, they want to take the sure thing as soon as possible. In a 2017 Social Security summary, the government said Social Security trust funds will be depleted in 2034. Even then, however, annual Social Security taxes are projected to keep benefits at almost three-fourths of current levels.
Do you think you're ready to claim Social Security early? Click through to learn the important questions you should ask yourself before deciding to retire.