3 Compelling Reasons to Start Social Security at 62

If you have spent some time researching this topic, you likely have been encouraged to delay applying for your Social Security retirement benefits for as long as feasible. This advice stems from the fact that the designated full retirement age, which ensures you receive 100% of your expected payouts, falls between ages 66 and 67—depending on your birth year. Opting instead to begin receiving these benefits at age 70 could result in significantly larger monthly disbursements.

On the opposite end of this range, though, lies an additional alternative. Despite resulting in significantly lower payouts, one could argue for filing as early as age 62. However, approach this decision with caution, as it is irreversible.

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Patience pays off

As has been mentioned, everyone who qualifies for Social Security 's retirement benefits will see 100% of their intended payments only if they start collecting once they reach their full retirement age, or FRA This year’s Full Retirement Age (FRA) is set at 66 years and 10 months for individuals born in 1959. The following year, however, the FRA will increase to a complete 67 years, remaining unchanged thereafter unless modified once more through new legislation.

But what if you wait to claim these benefits? Doing so will raise your eventual payments by about 0.66% per month, or 8% per year. For anyone reaching their full retirement age this year or next year, in fact, delaying these benefits until you're 70 years of age would mean about a 25% increase in the size of your monthly checks.

Don’t delay initiating your payments significantly past turning 70. The Social Security Administration ceases to increase your future monthly benefits after age 70, and they will only backpay you up to six months max.

Perhaps you considered initiating these payments far earlier than your Full Retirement Age (FRA)? This approach is also feasible. However, this decision significantly diminishes the amount of each payment, potentially lowering it by up to 30% should you decide to start claiming benefits at the youngest eligible age of 62. Quite a hit!

The arguments for making the claim earlier instead of waiting

Why would someone potentially jeopardize their financial stability in the future by agreeing to these reduced payment terms?

There are several clear-cut reasons for taking this step. The primary one is that you might require this funds just to ensure basic necessities like food and shelter, with alternatives like employment or leveraging any property you possess not being feasible at present.

One compelling secondary rationale for initiating Social Security benefits prior to reaching your Full Retirement Age (FRA), despite not requiring immediate funds, stems from the potential opportunity to allocate these resources towards another secure investment. This way, you might generate returns that exceed what you would receive through standard Social Security payments.

And whether for good or ill, this benchmark is quite modest. Even though the actual return on your funds locked into the Social Security system fluctuates yearly, it generally aligns with the country’s consumer price inflation rate or matches the returns on Treasury securities. U.S. Treasury bonds .

From 2008 through 2021—when interest rates hovered around their lowest points—it was not feasible to outperform this rate of return using bonds or certificates of deposit. Now that rates have returned to typical historical levels, many money market funds offer higher yields compared to what you would earn by allowing the Social Security Administration to hold onto your money until you reach your full retirement age.

Keep in mind how easy and tempting it might be to avoid taking this constructive action with the money once you have it in your hands.

Another reason to consider taking Social Security earlier instead of waiting is the potential for benefit reductions as the program nears financial instability. Should decreased payments become unavoidable (we should recognize that such concerns might be somewhat influenced by political factors), maximizing your total earnings by collecting full amounts for as long as possible would be advisable.

Moreover, earning income while simultaneously receiving early benefits is also an alternative, and potentially a beneficial choice for many individuals.

Even though earning an income while collecting Social Security benefits might seem like it could cut into those payments, this isn’t actually money lost forever. If your earnings reduce your benefit amounts temporarily, these reductions will be compensated later with larger monthly Social Security payouts in the future. This option essentially lets you enjoy both worlds—you can continue working and still receive benefits, all without suffering permanent consequences from doing so.

The first idea you came up with is probably your strongest one.

However, if none of these points seem compelling enough to persuade you that claiming Social Security benefits at 62 is advantageous, that might be beneficial. Overthinking and poorly planned optimizations frequently result in greater problems. It’s typically wiser to utilize such programs as they were originally meant and adhere to the standard approach. retirement and financial plans that have existed for many years.

That being said, there's nothing wrong with pulling out some pencil and paper and crunching a few honest numbers. For a few people, taking early Social Security actually does make good sense.

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