Though your Social Security benefits are calculated based on your highest 35 years of earnings, the age at which you first file for them will dictate your ultimate monthly payout. Eligible recipients actually get an eight-year window to claim benefits that begins at 62 and ends at 70. (Technically, you're not required to file for Social Security at 70, but there's no financial incentive not to.)
Smack in the middle of that window is full retirement age, otherwise known as the age at which you can collect the full monthly benefit your work record entitles you to. And not surprisingly, many financial experts will urge you to wait until full retirement age -- which is either 66, 67, or 66 and a certain number of months -- or even beyond to get the most money possible out of Social Security. That's because for each year you file before full retirement age, you'll lose a portion of your monthly benefits -- and quite potentially for life.
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But sometimes, it pays to get your hands on your Social Security benefits as early as you can -- meaning, as soon as you turn 62. Here's why.
1. You may come to need the money
You might plan on working well into your 60s or even 70s, but life might throw a wrinkle into that strategy. An estimated 60% of workers wind up retiring sooner than planned, and the reasons run the gamut from health issues to layoffs. Either way, there's a good chance you'll find yourself in the position of needing money and not having enough savings to cover your living expenses, so if that's the case, don't let stubbornness or your desire to grow your benefits cause you to make a very bad decision -- racking up debt while you wait to file. The amount you'll pay in credit card interest, for example, will well exceed the hit you'll take on Social Security by claiming benefits as early as possible, so you're better off collecting the money you're entitled to.
2. You'll come out ahead if your health is poor
One interesting thing about Social Security is that it's designed to pay you the same lifetime total regardless of when you initially file. Think about it: Though claiming benefits at 62 will result in the highest possible reduction you could face, you'll also collect more payments than you would by waiting until full retirement age. Therefore, you essentially stand to break even at the end.
This formula, however, assumes one critical thing: that you'll live an average lifespan. If your health is poor, however, and you have reason to believe you won't live a very long life, then it generally pays to get your hands on your benefits as early as you can.
Here's an example. Say you're entitled to a full monthly benefit of $1,600 based on your work history, assuming you file at your full retirement age of 67. If you start collecting benefits at 62 instead, you'll reduce each monthly payment to $1,120, but you'll collect 60 more individual payments. If you live until 78-1/2, you'll end up with roughly the same lifetime total under either filing scenario. But if you pass away at 75, you'll come out $21,000 ahead by filing at 62. And that's reason enough to snag those benefits as early as you can.
3. You want to enjoy your life while you're relatively young
It stands to reason that you'll have more energy to make the most of retirement at 62 than at 67 or later. Therefore, if you've saved well all your life, and a reduction in benefits won't impact your ability to pay your bills once you stop working, then you might as well start collecting Social Security while you're young enough to enjoy it as much as possible.
Of course, if you think you'll come to count on your benefits to constitute the bulk of your income later in life, this argument won't hold water. But if you know you don't technically need those benefits, it pays to claim them at a time when they'll best serve you.
You'll often hear that filing for Social Security as early as possible is a dangerous move that will hurt you in the long run. And in some situations, that's absolutely right. At the same time, there are some circumstances under which claiming benefits early makes sense, so don't hesitate to pull the trigger if any of them apply to you.
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