Depending on your financial situation, you may or may not feel anxious about retirement. Since the pandemic, many Americans have lost their jobs and senior Americans have been the first to go in most cases. The lack of job security for seniors has left an unsettling amount of financial strain. Some seniors find themselves reaching for Social Security benefits as early as age 62. There are pros and cons to this strategy of financial security. Depending on your circumstances, claiming your social security benefits early may benefit you most.
Which type are you?
Are you the type of person that has not saved much for retirement and find yourself extremely reliant on Social Security? Or are you in the other boat and have sacrificed a lot of things to save a retirement nest egg?
If you are the saver, it pays to claim Social Security at 62, because that way, you can put that money to work while you’re younger. You can use it to travel, to invest in a vacation home, or to start a business that keeps you busy and generates extra revenue for you during your senior years.
If you wait until full retirement age (FRA) to file, you’ll avoid a reduction in benefits. If you delay your benefits beyond FRA, you’ll boost them by 8 percent a year. And if you sign up at the earliest possible age of 62, you’ll slash your benefits for life, but you’ll also get that money a lot sooner.
The downside of claiming Social Security early is locking in a lower monthly benefit for life. But the Social Security Administration (SSA) offers all filers a single do-over when it comes to claiming benefits without any lifelong reduction to their benefits.
Making the decision to file
If you sign up at 62 because you’re out of work temporarily or simply unable to work, but your financial circumstances improve within a year, you’ll have the option to undo your filing and claim benefits at a later date. Unfiling within that year mark will allow you to avoid a scenario where you slash your Social Security benefit permanently.
Now to get that “do-over,” you’ll need to do two things:
- Withdraw your application for benefits within a year of submitting it.
- Repay the SSA all of the money it paid you.
But let’s say you’re laid off at work when you’re 62 and you’re confident you’ll find a new job in time. You might claim Social Security to avoid falling behind on bills or racking up debt, get a new job eight months later, and then manage your finances diligently so you’re able to repay all of your benefits by the one-year mark. This is more common than you realize. This is how many seniors receive the money that they need at 62 and gain a non-reduced benefit throughout retirement.
When should YOU claim?
There are plenty of good reasons to file for Social Security at the earliest possible age of 62. But before you make the decision to file, you should consider your personal financial picture and goals. It may be that signing up for benefits at 62 is the right choice, but if not, go ahead and file when you are ready.