(Sam Swenson, CFA, CPA)
With soaring inflation and rising interest rates, Social Security is set to play an even bigger role in retirees’ income and spending plans. Now, perhaps more than ever, people need guaranteed monthly income to cover foreseeable retirement expenses.
Conventional wisdom says you’ll end up with more money by waiting until age 70 to file for Social Security benefits, and to a large extent that’s true. However, there is a large portion of the population that would do better to claim benefits as soon as possible.
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Below, we’ll briefly go over four reasons why you might consider taking Social Security at age 62.
1. You are in poor health
If you have any health issues, you will need to consider your life expectancy before filing for Social Security. If you don’t expect to live into your mid-80s or beyond, you’re probably better off taking the cash sooner, just because you know you’ll be there to receive it.
However, keep in mind that there are some things you may need to consider regarding family benefits. Overall, this is a risk and reward calculation that you will need to consider with your family and, ideally, with an objective financial planner.
2. You need or want money
It’s about as simple as it gets: you take Social Security when you need or want money. Given the shrinking population of defined benefit pension plans — combined with the stock and bond markets not cooperating in 2022 — it’s no wonder people want access to more guaranteed income.
Since Social Security behaves like a minimum expense floor in retirement, claiming benefits can make a lot of sense for those who need reliable money each month. If you decide it’s time to file for whatever reason, feel free to go for it.
3. You don’t like your job
If you’re working in a career that doesn’t bring you some satisfaction, the fact that it might be “tolerable” might not really be enough once you hit your 60s. Working in a toxic or unpleasant environment can lead to a host of mental and physical problems, so you might consider applying for Social Security benefits as soon as they become available to you.
The lure of more money down the line may sound nice, but it can also be impractical to wait if you want to change the structure and mood of your life.
4. You are the spouse who earns the least
Some couples employ a strategy where the lower-income spouse takes Social Security at age 62 and the higher-income spouse waits as long as possible to claim benefits. This allows the couple to collect income in the meantime, while high earners’ benefits increase by 8% for each year they delay their claim beyond full retirement age (“FRA “).
Once the higher-income spouse finally claims benefits, the lower-income spouse can switch to “spousal benefits,” which is 50% of the higher-income spouse’s benefits. This makes sense if the couple’s spousal benefit exceeds the lower earning spouse’s individual benefit.
Examine your own situation
You’ll find that almost everyone has a theory about when is the best time to take Social Security, but the only one who really knows what’s best for you is you. Take enough time with your family to consider your options, and don’t be afraid to consult a paid financial planner for advice if you need it.
Taking Social Security is a big decision. Before you file a claim for benefits, make sure you understand what you’re getting and what you’re giving up. Ultimately, move forward confidently with the choice that serves you in a way that works for you.
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