Claiming Social Security at 62 is a popular strategy because it gives you the most checks. But it also reduces your checks by up to 30%. That's because the government gives you a penalty for every month you claim benefits under your full retirement age (FRA) -- 66 to 67 for today's workers.
But that doesn't mean that claiming early is always the wrong decision. There are three times where it's often the right call.
Image source: Getty Images.
1. You cannot afford to delay benefits
Delaying Social Security slowly increases your monthly benefit and this doesn't stop at your FRA. You continue to grow your checks until you qualify for your maximum benefit at 70. That gives you up to 32% more per check than what you'd get at your FRA. But to do this, you'd have to forgo benefits for eight years.
This might be doable if you have substantial personal savings or if you have a job that provides you with a steady paycheck until you're ready to apply. But those who don't have other income sources to fall back on may have no choice but to claim Social Security early.
This could reduce your lifetime benefit, but it's a better option than falling into debt. Larger checks down the road are nice, but you have to prioritize your current financial security.
2. You have a short life expectancy
Delaying benefits often results in a larger lifetime benefit, but because you're claiming benefits for fewer years, you also have to weigh your life expectancy. Those who live into their mid-80s or longer typically benefit the most from delaying while those with shorter life expectancies may be better off applying earlier.
If you have a terminal illness or a poor personal or family health history, you may prefer to apply under your FRA or even as early as 62. This way, you'll receive as many checks as possible while you're alive.
However, if you have dependents who rely upon your income, you should know that claiming early will reduce the survivors benefit they're eligible for after you pass away. If you're worried about this, you may prefer not to apply for benefits at all.
3. You're the lower-earning spouse
One popular strategy couples use to maximize their Social Security benefits is for the spouse who has earned less throughout their career to claim Social Security at 62. This provides the couple with some benefits they can use to supplement their income while the higher earner delays Social Security until they're older and eligible for larger checks.
When the higher earner signs up, the lower earner can switch to a spousal benefit if this is worth more than what they're currently receiving. The spousal benefit is up to one-half of the benefit the worker qualifies for at their FRA.
This strategy typically works best for couples where there's a significant income disparity. If both partners have earned similar amounts throughout their careers, it's often more advantageous for each to choose their claiming age based on their financial circumstances and life expectancy as described above.
Even if you're decades away from claiming Social Security, it's helpful to have some idea of when you plan to apply. Choose a tentative claiming age now and feel free to adjust this as you get closer to retirement.
