Seniors are often warned against the dangers of claiming Social Security early. And in this context, “early” means prior to full retirement age, or FRA. FRA is 67 for anyone born in 1960 or later.
Many seniors inevitably wind up becoming heavily reliant on Social Security once their careers end and their paychecks go away. Since an early filing results in a lower monthly Social Security benefit for life, it’s easy to see why seniors are often encouraged to wait until FRA to sign up, or even beyond (delayed filings result in boosted benefits up until age 70).
The idea of accepting less money on a monthly basis, rather than more, may not sit so well with you at first. But in these situations, filing for Social Security early is probably the right thing to do.
1. When your health is poor
If your health isn’t in good shape, and you’re inclined to think you won’t live a very long life because of that, then an early Social Security filing suddenly becomes a savvy move, not a reckless one. What you lose out on by slashing your benefits on a monthly basis, you might gain in the form of more income on a lifetime basis.
Let’s imagine you’re in line for a $2,000 monthly Social Security benefit at a FRA of 67. Filing at 62 will mean limiting yourself to a benefit of $1,400 a month instead. If you end up living well into your 80s, you’ll lose out on your lifetime benefit by virtue of that early filing. If you only live until your mid-70s, you’ll come out ahead in total lifetime benefits by signing up for Social Security early rather than waiting for FRA.
2. When you’re unable to work and don’t have savings
Claiming Social Security early could result in a pretty big hit to your monthly benefits. But if you’re out of work with no prospects and don’t have savings to fall back on, then an early filing starts to make sense.
Let’s imagine that without Social Security, you’d have no choice but to live on credit cards. That could mean signing up to pay something exorbitant like 20% interest on your balances. That’s just not sustainable over time. So in a situation like that, it’s easy to make the argument that claiming Social Security early is just plain something you have to do.
3. When you’re starting a business you’re excited about
Many people don’t want to take on the risk of owning their own business when they have a family to support. Once retirement rolls around, though, you may be looking at starting a business to stay busy and secure some supplemental income. And claiming Social Security early could be your ticket to getting that business off the ground.
It’s true that you’ll be looking at a permanent reduction in your monthly Social Security income if you sign up for benefits early. But what if your business is so successful that it makes up for that reduction and then some? In that case, an early filing becomes worth it.
Of course, in the absence of a crystal ball, there’s really no way to know how successful your business will be. But if you have a solid plan and the time to dedicate to your venture, then it pays to think positively.
Seniors are often told that claiming Social Security early is a move they’ll sorely regret. In some cases, that’s solid advice. But there are exceptions. And if you fall into one of these categories, you may find that filing for Social Security well ahead of FRA is a move that serves you quite well.