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3 Times It's Smart to Take Social Security Early

Kailey Fralick, The Motley Fool

American workers become eligible for Social Security at age 62, but the masses warn against taking benefits this early. Here's the usual spiel: If you begin collecting income from Social Security before you reach your full retirement age, which is either 66 or 67 depending on the year you were born, you won't get as much money in each check you receive. In fact, individuals with a full retirement age of 66 who claim at 62 will receive just 75% of their scheduled benefit, while those early claimers whose full retirement age is 67 receive only 70% of the amount they could get if they delay claiming benefits.

But as with almost all pieces of financial advice, the admonition to wait in order to collect larger monthly payouts later on isn't the right move for everyone. It always depends on your personal situation. Here are three circumstances when it makes sense to claim Social Security as soon as you're eligible.

Social Security card

Image source: Getty Images.

1. You don't anticipate having a longer than average life.

No one wants to think about dying, but the reality is that some people will live longer than average while others will have a shorter than average lifespan.

The advantage of delaying Social Security benefits until your full retirement age is that you'll receive more money to live on each month once you begin collecting. But waiting to apply also means you will ultimately collect fewer checks, albeit larger ones.

So, while waiting would potentially net you more overall if you live a long time, if you have a terminal illness or a history of serious health problems in your family, you might not collect benefits for a long enough period to make up for what you missed by waiting. In that case, you're better off taking Social Security as soon as possible.

Of course, it's impossible to predict exactly how long you'll live but you can estimate it. Average life expectancy is 78.6 years. Start from there and adjust up or down. (There are a number of life expectancy calculators available online that can help.)  Then, calculate how much you would earn in benefits in your lifetime if you started taking them at 62 vs. what you would net if you waited until your full retirement age.

For example, if you wait until a full retirement age of 67, at which point you are entitled to $1,000 per month in benefits, you'd receive about $144,000 in benefits by the time you turned 79. If you began taking Social Security at 62, you would only receive 70%, or $700 a month, and by 79, you would have received almost as much: $142,800. However, if you only lived until 70, you would receive a total of $67,200 if you began claiming benefits at 62, compared to the $36,000 you would collect if you'd waited until your full retirement age.

2. You earn less money than your spouse.

A common strategy for married couples is for the lower earner to begin claiming Social Security at 62. They'll receive less per check, but it also means the household will have some supplementary income coming in right away. That may allow the higher earner to delay claiming Social Security until their full retirement age, or even until age 70, when they'll receive the maximum amount of 124% or 132% of their "full" monthly benefit per check, depending on if their full retirement age is 67 or 66, respectively.

If you both make about the same amount of money, this strategy can still work to bring in more income sooner, but you may prefer to both wait until your full retirement ages to begin claiming. Figure out how much you expect to get from Social Security, and then experiment using a calculator with different scenarios to see what your best move is.

3. You're unable to keep working and you need the money to survive.

The worst-case scenario is that you find yourself retiring earlier not because you choose to, but because you have to. If you're 62 or older, you can begin drawing on Social Security benefits to help supplement your other sources of retirement income. Or, if you qualify for disability, you could sign up for that instead to help you sustain your spending in retirement. The amount you will receive depends on how much you have paid into Social Security over your lifetime. You can estimate this by creating a my Social Security account. Your disability benefits automatically convert to Social Security benefits once you reach your full retirement age, but you will continue receiving the same amount as you were before.

While it's usually better to wait to take Social Security if you can, the above examples show that there are times when it makes sense to start collecting early. But no matter your circumstances, before you apply, evaluate your situation thoroughly, and consider how your choice will affect your overall finances both in the short and longer term.

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