3 Reasons to Claim Social Security Early

By Markets Fool.com

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At age 62, you're still a few years away from full retirement age, yet more people choose to claim Social Security at 62 than any other age. However, every situation is different, and the best age for you to claim Social Security depends on several factors. With that in mind, here are three reasons you might want to start your Social Security checks early.

You need the money

The most obvious reason to start receiving Social Security early is simply because you need the income to cover expenses. There are a variety of reasons why this may be the case.

Maybe you ended up retiring earlier than you planned. After all, the average working American plans to retire at age 66, but actually retires at age 62. Things happen -- layoffs, health problems, etc. -- and an unplanned early retirement can create a major income problem for retirees who were planning on saving for a few more years.

Or, maybe your retirement savings aren't quite sufficient to live on all by themselves. The average 401(k) balance for an American worker aged 55-64 is $186,404. This may sound like a lot, but the popular "4% rule" of retirement says that this amount of savings can only be expected to provide about $7,500 in sustainable retirement income per year.

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There are plenty of other reasons you might need the money before full retirement age. For instance, maybe you're still working or have plenty of retirement savings, but are having costly health issues. Whatever the reason, Social Security provides a lifetime of guaranteed inflation-adjusted income, and millions of Americans don't have the financial means to wait until their full retirement age to tap into it.

Your spouse is turning 66

Social Security spousal benefits can be a big boost to the retirement incomes of married couples, especially when one spouse didn't work, or only worked intermittently. Here's a thorough look at spousal benefits, but in a nutshell, if your spouse's Social Security benefit at full retirement age is less than half of yours, a spousal benefit kicks in to make up the difference.

For example, if you are entitled to $1,600 per month, while your spouse is only entitled to a $500 benefit based on their own work record, a spousal benefit of $300 per month would be added to theirs.

One important detail about spousal benefits to keep in mind is that there is no such thing as delayed retirement credits for spouses. If you delay your own benefit past full retirement age, it will be permanently increased by 8% per year, up until as late as age 70. Spousal benefits have no such feature. And, one of the conditions for receiving a spousal benefit is that the primary earner must already be collecting their own Social Security benefits.

Therefore, if your spouse is expecting a spousal benefit based on your work record, it rarely pays to delay your Social Security beyond the time when you both reach your full retirement ages. Depending on when you were born, this could be from 66 to 67 years old.

Because it's all the same (theoretically)

As a final reason to claim early, consider the reason why Social Security benefits are lower if you claim early and more if you claim late. The Social Security does this so that the average beneficiary gets the exact same amount of benefits during their lifetime, no matter when they decide to claim theirs.

According to the current actuarial tables used by the Social Security Administration, the average 62-year-old can expect to collect Social Security for a total of 21.4 years. And, the average 70-year-old will end up collecting benefits for 15.3 years. When accounting for the next eight years' worth of projected inflation, the total theoretical amount the average beneficiary will receive only varies by a few hundred dollars.

So, whether you start benefits at 62, 70, or anywhere in between, you'll get the same amount of lifetime benefits, in theory. Of course, you could live to be 100, or you could die at 71 -- there's no way to know for sure. The point is that you shouldn't delay Social Security simply because you think you'll end up getting more money that way.

What's best for you?

As a final thought, when considering the pros and cons of early Social Security, keep your own situation in mind and plan accordingly. For example, if you're still working at full retirement age, are in good health, and don't need the money yet, by all means wait. On the other hand, if your spouse is depending on you for their spousal benefit, you're already retired, or if you just need the extra income now, there's nothing wrong with starting your Social Security benefits early.

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