Should I take Social Security at age 62?

When to start claiming Social Security benefits is one of the most important decisions facing retirees. It is one of those rare decisions that will literally impact the rest of your financial life, as well as the life of your spouse. So, taking the time to run the numbers and understand the costs, benefits and risks of your decision can have huge payoffs.

8% or 1%?  The question is almost rhetorical: would you prefer an 8% annual guarantee on your money or a 1% guarantee?  While no one would outright refuse the 8% guarantee, that is exactly what individuals are doing with their Social Security benefits. See for yourself. The chart below assumes a full retirement age of 66, which is the case for individuals born from 1943 to 1954, and assumes the individual is eligible for a $1000 benefit at full retirement.

Age         Monthly Benefit
62                 $   750
 64                 $   866
 66                 $1,000
 68                 $1,080
 70                 $1,320

Claim your benefits at age 62 instead of 66, and your benefits are cut by 25%. Postpone your benefits beyond age 66 to age 70, and you’ll be rewarded with an 8% annual increase. But who really wants to postpone those benefits when you can deposit the early claim checks into your bank account and earn those historically low interest rates.

Beyond the simple math:  In addition to addressing when to claim benefits, married couples need to decide whose benefits to claim. It usually makes sense for the spouse with the lower life-time earnings to claim first, while delaying the benefits of the higher-earning spouse as long as possible. This decision can maximize benefits while both spouses are alive, as well as maximize the options for benefits after one spouse has dies. Divorced individuals, who were married at least 10 years, must also carefully weight their options, as they often have the same rights as if they were still married.

Be Informed. Be Intentional: Over the years, I have asked many folks, after the fact, why they claimed their benefits immediately at age 62, and too often the answer is “Because I could.” That answer doesn’t stand the test of time, when an 80 year old wishes they had more income; which they could have had if they had delayed claiming those benefits. So, my advice for when to claim benefits is to be informed and be intentional.  Use the simple calculator at the Social Security website, visit the local Social Security office, or work with a financial advisor who is knowledgable on claiming strategies. The resources are readily available to make a good decision. So, unless you have an older sister familiar with your finances, and trained in Social Security claiming strategies, grabbing the first check at age 62, may not be the best advice.