There's a reason 62 happens to be the most popular age to claim Social Security: It's the earliest age you're allowed to get at those benefits. But while the idea of snagging your cash sooner might seem appealing, you should know that there's one major drawback to filing at 62, and it's that doing so will reduce your monthly benefits -- for life.
Though your Social Security benefits themselves are based on what you earned during your 35 highest years of income, you'll only collect your benefits in full if you wait until full retirement age to claim them. For today's older workers, full retirement age falls somewhere between 66 and 67, and for every year you take benefits early, you lose a percentage of what you'd otherwise collect. That's why it's often a good idea to wait until full retirement age to file for Social Security.
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That said, there are certain scenarios where taking benefits at 62 makes sense. Here are some that might apply to you.
1. You're desperate for cash
We just talked about the fact that claiming Social Security early will cause your monthly payments to go down. But what if you reach 62 and suddenly find yourself in a situation where you need money and don't have many options?
It happens more often than you'd think. According to Voya Financial, 60% of Americans wind up retiring earlier than planned, and the reasons run the gamut from poor health to job loss. If you're laid off at 62, for example, and don't have enough savings to cover your living expenses, you're basically looking at two choices: rack up costly credit card debt, or take Social Security early. And of those, the latter is the much better option.
2. You don't need the cash
Just as being desperate for money is a good reason to file for Social Security at 62, the opposite is also true. If you don't need your benefits right away, but rather want the money to supplement what's already a healthy amount of retirement income, then you might as well start collecting Social Security so you can use that cash as you please.
Imagine you retire at 62 with a substantial nest egg -- enough to cover your living costs, but perhaps not quite enough to allow you to jet set around the globe. If taking your benefits early means getting to travel when you're younger, and are apt to have more energy to enjoy it, then it pays to take your money sooner.
3. You don't expect to live a long life
Even though you'll face a reduction in benefits by filing at 62, the interesting thing about Social Security is that it's designed to pay you the same amount in lifetime benefits regardless of when you first file. Think about it: Taking benefits early will reduce each individual payment you collect, but you'll also get more payments in your lifetime, so eventually, things will even out.