Are you thinking about claiming Social Security benefits at age 62? If so, you're in good company. Sixty-two has long been one of the most popular ages to claim benefits. It's also the earliest age at which you're eligible.
Claiming Social Security at 62 means you start getting income right away, but your monthly checks are smaller than they'd be if you'd waited. Lots of people would likely be better off delaying to get bigger benefits, so why do so many people claim early?
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Here are a few reasons -- some good, and some bad.
1. Because they don't understand the impact of claiming early
One of the most common reasons people claim Social Security at 62 is because they don't realize what this does to their monthly benefits. If you claim Social Security before full retirement age (FRA), your benefit is reduced by 5/9 of 1% per month before FRA. If you claim more than 36 months early, your benefit is reduced by an additional 5/12 of 1% per month for each of those earlier months.
This can result in as much as a 30% reduction in the standard benefit you'd have received if you waited until your FRA. Unfortunately, many people mistakenly believe they'll get their reduced benefits until FRA and then their income will increase to their standard benefit amount.
This isn't true. Your lower benefits persist throughout retirement, and your cost-of-living adjustments are also calculated based on the lower benefit.
If you don't understand that benefits are permanently reduced, claiming early seems like the smart move. In reality, you should do the math to determine if claiming early actually makes sense for you by calculating how long it'd take for higher monthly benefits to make up for years without Social Security income.
If you expect to live long enough to break even or get more benefits by delaying, doing so makes financial sense.
2. Because they don't realize they have other options
Another big reason so many people claim Social Security at 62 is because they can't work due to health issues and don't have enough money to live without a job. Unfortunately, many people just assume Social Security retirement benefits are their only options if illness or injury forces them out of the workforce.
In reality, you can often qualify for Social Security Disability Insurance (SSDI) if you have a disabling condition that prevents you from working. It's easier for disabled older people to get benefits than for younger people, and your SSDI benefits amount is the amount you'd receive at FRA, rather than a reduced benefit you'd get if you retired early.
By claiming disability benefits, you can wait to get your retirement benefits until you reach full retirement age, thereby avoiding a reduction in benefits caused by early retirement. And, you can get a disability freeze so years of lower income due to your disability don't reduce the average wages over your career that Social Security benefits are based on.
If you don't realize you have this option and you claim Social Security at 62 because of a medical concern, you could be missing out on a lot of money.
3. Because they don't have other options
Sometimes, you have to leave the workforce not because you have a health issue -- or because you're ready to retire -- but because you can't find work. If that's the case and your unemployment benefits run out or aren't enough to live on, you may have no choice but to claim Social Security benefits early.
If you have no other options, claiming Social Security makes sense rather than living in poverty just to wait to get a slightly bigger benefit later.
But, don't feel that because you've claimed Social Security you have to give up your quest for work. If you find a job, your Social Security benefits will be reduced when you earn too much income if you're under FRA. But, you'll get credit for these unpaid benefits, raising your Social Security income later. Don't stop looking for work if you're one of the many who claims Social Security at 62 due to unemployment and you aren't happy with the fact you're stuck with smaller benefits.
4. Because they want to enjoy life
Finally, there's one good reason people claim Social Security at 62: to enjoy life.
If Social Security makes early retirement possible or gives you more money to enjoy retirement while you're still young and healthy, it may make sense to just claim your benefits. Yes, you'll have less money than if you waited -- but there's no guarantee you'll be alive and well in the future, so you may just decide you'd rather live for today.
While there's nothing wrong with this approach, if you're choosing to claim a smaller benefit at 62, make sure that you aren't setting yourself up for a life of poverty later if your savings run out and you're too old and sick to go back to work.
Choosing the right age at which to claim Social Security is complicated
There's lots of advice out there about when to claim Social Security, and there are both pros and cons of claiming at 62. But, the bottom line is, millions of people choose to start receiving their benefits at this age, and they can't all be wrong.
So, don't discount the idea of getting your benefits early -- decide if your reason for doing so makes the most sense for your situation, then act accordingly.
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