3 Reasons to Claim Social Security Before Your Retirement Age

When it comes to Social Security, the usual advice is to hold off on taking benefits as long as possible. While most people could claim benefits as early as age 62, your monthly benefit amount will grow each year that you wait up to age 70. (See also: 6 Smart Ways to Boost Your Social Security Payout Before Retirement)

However, there are some situations where taking benefits as soon as possible may be the better way to go. Here are three such scenarios.

1. You Need the Money

If you can't find a job, or simply don't have enough savings to live on, claiming Social Security benefits at age 62 may be your only option.

Just keep in mind that if you do find a job, there are limits to how much you can earn without impacting your Social Security benefits. In years when you are younger than your "full retirement age" (65–67, depending on when you were born), for every $2 you earn above $16,920, your Social Security benefits will be reduced by $1.

2. Longevity Doesn't Run in Your Family

One way to evaluate the impact of claiming Social Security benefits at various ages is to run what's known as a break-even analysis.

When you claim as early as possible, your monthly benefit amount will be smaller than it would have been if you claimed later. However, the head start that early claiming provides means that if you claim benefits at a later age, even though the monthly amount is higher, it'll take a number of years before you've broken even with the total amount you would have received by claiming earlier.

For example, here's a look at a friend's estimated monthly Social Security benefits and how they vary depending on when he claims benefits:

  • $1,529 if claimed at age 62
  • $2,273 if claimed at his full retirement age of 67
  • $2,873 if claimed at age 70

If he claims benefits beginning at age 62, by the end of the year that he turns 67, he will have received a total of over $100,000. If he waits until age 67 to begin taking benefits, it will take him until approximately age 78 before his accumulated benefits would overtake the total he would have received if he had started taking benefits at age 62.

If he didn't expect to live to age 78, it would make sense to claim benefits earlier. Of course, that's a tough call. Even in families when one or both parents die early, some of their kids live far longer.

To find out your own estimated Social Security benefits, create an account on the Social Security Administration's website.

Run Your Own Break-Even Analysis

Unfortunately, there isn't an easy way to run your own break-even analysis. The Social Security Administration used to have a calculator on its site designed for this purpose, but took it down because they felt it was encouraging too many people to claim early.

One workaround is to run various scenarios with this calculator. As a starting point, enter your "current age" as 62, enter your estimated age of death in the "retirement age" field, enter the annual age-62 benefit amount in the "your current annual income" field (the SSA website lists benefits in monthly amounts, so be sure to multiply by 12), and then use the "annual salary increase" field to enter an estimated inflation rate (Social Security benefits are adjusted for inflation each year; use a relatively low amount — somewhere between 1% and 2%).

Then run the same analysis, but change your "current age" to your full retirement age and change "your current annual income" to the annual amount of your full retirement age benefit.

3. You Have Plenty of Money Already Saved for Retirement

If you have enough money to live on regardless of your Social Security benefits, that may be another reason to take Social Security benefits as early as possible. You could use the money to invest, buy a long-term care insurance policy, or buy a life insurance policy.

It's true that you should think very carefully before claiming Social Security benefits at age 62. There's a hefty increase in the monthly benefit amount for each year that you wait. And if you're married, keep this in mind: When you die, your spouse will be able to choose to take the higher of their benefit or your benefit. If you had been the higher earner, by waiting as long as possible before claiming your benefit, that will be very helpful to your spouse once you're gone.

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