3 Reasons to Claim Social Security Early

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Depending on when you were born, your full Social Security retirement age can be 66 years old, 67 years old, or somewhere in the middle. However, regardless of your official full retirement age, all Americans who are eligible for Social Security benefits can claim theirs as early as age 62.

While claiming Social Security early isn't a good idea for everyone, there are certainly some scenarios where it makes good financial sense. Here are three specific reasons why claiming your Social Security retirement benefits early could be a smart move for you.

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You want to get your money as soon as you can

This may seem like a completely obvious reason to claim Social Security early, and in many ways it is. After all, if you want to start receiving Social Security benefits as soon as possible, it makes sense to claim your benefits as soon as you're allowed to.

However, this isn't so obvious for some people -- particularly those who are still working. The Social Security earnings test says that for people who have not yet reached full retirement age, there's a maximum amount of money that can be earned before their Social Security benefits are withheld.

For 2018, the earnings test limit for people who will reach full retirement age after 2018 is $17,040. Beyond this amount, $1 of your Social Security benefits will be withheld for every $2 in additional earnings. What this means, for example, is that if you are entitled to a monthly Social Security benefit of $1,500, your entire benefit can be withheld by the SSA if you earn more than $4,420 per month ($53,040 annually).

Many older workers know this, and don't claim Social Security for fear of losing their benefits. However, it's important to point out that any benefits withheld because of your earnings are not lost. In fact, once you reach full retirement age, any withheld benefits will serve to make your monthly benefit permanently higher. In other words, don't delay applying out of fear of the Social Security earnings test.

The point is that if you want to collect Social Security as soon as possible, go ahead and apply. If you're still working, the earnings test might reduce, or even entirely eliminate your benefits for now, but they'll restart as soon as your earnings allow it.

Your spouse has reached their full retirement age

It's fairly common knowledge that delaying Social Security past your full retirement age results in a higher monthly benefit. This is known as "delayed retirement credit," and to make a long story short, your benefit can be permanently increased by 8% for every year you wait to claim beyond your full retirement age.

However, many people don't realize that Social Security spousal benefits don't have the same provision.

While there's more to the spousal benefits program than can be explained in a few sentences, the simple version is that it provides retirement income for spouses who either didn't work or earned relatively little throughout their life. In these cases, a spousal benefit can provide up to half of the primary earner's full retirement benefit. For example, if you are entitled to $1,500 per month at your full retirement age, and your spouse never worked, he or she would be entitled to a $750 monthly spousal benefit at their full retirement age.

Unlike a retired worker's benefit, there's no financial motivation for delaying a spousal benefit beyond full retirement age. In other words, if your spouse claims a spousal benefit at age 67 or waits until age 70, it will be the exact same benefit amount (adjusted for inflation).

One of the key requirements for spousal benefit eligibility is that the primary earner must be collecting their own benefit as well. For this reason, if your spouse is older than you and is expecting to collect a spousal benefit on your work record, it rarely makes sense to delay claiming Social Security beyond their full retirement age.

You're concerned about your health

The Social Security program is designed so that all beneficiaries receive the same amount of benefits, after adjusting for inflation, no matter when they claim. In other words, if you choose to claim at age 62 instead of age 65, those three years of additional benefits should roughly offset the lower monthly benefit amount you'll get.

In fact, with ever-increasing life expectancies these days, the program is slightly weighted in favor of claiming later -- that is, the average American is generally better off waiting, in terms of how much they can expect to collect throughout their lifetime.

Having said that, if you have reason to believe that your life expectancy could be somewhat below average, it could make sense to claim Social Security early. As a personal example, I have a family history of heart disease and my paternal grandfather died at 59 of a heart attack. While I'm not saying that this factor alone will make me claim Social Security early, and I feel that I take better care of myself because of my family history, something like this is certainly worth taking into consideration.

Consider the big picture

On that note, it's important to emphasize that no one factor should determine when you claim Social Security. You should consider your overall financial and family situation -- such as how much retirement savings you have, your spouse's age and potential Social Security benefit, and your health, just to name a few.

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