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3 Awful Reasons to Take Social Security Benefits at 62

Maurie Backman, The Motley Fool

Social Security helps millions of seniors stay afloat financially today, so it's important to strategically file for benefits. The Social Security Administration (SSA) gives you an eight-year window to claim benefits, beginning at age 62 and lasts all the way until age 70. (In fact, you don't have to file at 70, but there's no reason to wait past that point.)

Because 62 is the earliest age to claim Social Security, it's a popular choice among seniors. But here are three terrible reasons to file at that point.

1. You think it's when you're entitled to your full benefit

Your Social Security benefits are calculated based on your highest-paid 35 years in the workforce, but you're only eligible for your full monthly benefit at your full retirement age, which depends on your year of birth, as follows:

Year of Birth

Full Retirement Age

1943-1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 and after

67

DATA SOURCE: SOCIAL SECURITY ADMINISTRATION.

Shockingly, only 26% of people could correctly identify their full retirement age, according to a 2017 Fidelity survey. But just because you're allowed to take benefits at 62 doesn't mean that 62 is actually your full retirement age. In fact, as you'll see above, the earliest possible full retirement age is 66. Furthermore, for each month you claim benefits ahead of full retirement age, they'll be reduced by a certain percentage, and the earlier you file, the more money you stand to lose. Remember, the monthly benefit you lock in initially is generally the same benefit you'll continue collecting for life, so a major reduction could hurt you financially for years to come.

Older man with sad expression holding his head

2. You're convinced Social Security is going broke

You may have heard rumors that the Social Security program is in trouble, and to some degree, that's true. The program is facing a pending shortfall that, if left unaddressed, could result in an across-the-board cut in retirement benefits. However, as of the latest Trustees Report, the worst-case scenario looks like a 20% reduction. That's not great, but it's also not the same thing as the program going away completely.

Therefore, don't let that misinformation drive you to file for benefits early. The aforementioned benefits cut isn't slated to happen until 2035 at the earliest, leaving lawmakers plenty of time to arrive at a solution to avoid it.

3. You figure you'll withdraw your benefit application after the fact

One lesser-known fact about Social Security is that you can actually undo your benefits after you file. If you withdraw your application within a year, you can then claim benefits again at a later point in time. For example, you could, conceivably, file for benefits at 62, withdraw your application eight months later, and then file again at your full retirement age, thereby avoiding a reduction.

There's a catch, though -- to get that second chance, you'll also need to repay the SSA every dollar it paid you in benefits within that one-year timeframe. Therefore, if you're thinking you'll just collect some money, withdraw your application, and start over later, try again. Unless your need for money is truly transient and you're convinced you can repay those benefits (say, you've lost your job and don't have savings to live on, but you're getting a major severance payout from your former employer six months later), don't bank on a do-over.

Claiming Social Security benefits as early as possible isn't always a terrible idea. For example, if your health is really poor, and you have a shortened life expectancy, then you're generally better off filing at 62 rather than waiting to maximize your benefit amount. Similarly, if you can't work, you have no savings or income source outside of Social Security, and you aren't anticipating a windfall in the near future, then you may, frankly, have no choice but to file for benefits at 62, and doing so is certainly better than living off credit cards. But if any one of the above reasons is the driving force behind your decision to claim benefits at 62, then take a step back and rethink that plan -- before it's too late.


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