It’s a good idea to try to figure out when you’ll claim Social Security, well before you retire. That way, you can estimate your monthly benefit based on your filing age. And from there, you can do some math to make sure you’re making a smart decision.
There is now a fairly wide range of Social Security filing ages to choose from, the earliest of which is 62. Technically, there is no latest or final filing age, but you should know that there is nothing to be gained financially by delaying Social Security until after age 70.
But you often hear that it is wise to wait until your full retirement age (FRA) to apply for Social Security, which is 66, 67 or somewhere in between, depending on when you were born.
Full retirement age is when you start receiving your full monthly Social Security benefit based on your individual wage history. If you start receiving your benefit at age 62, it could be cut by 30%, which is a financial hit you may not want to take.
But while claiming Social Security at age 62 may not be your optimal choice, you may still want to plan on it. Here’s why.
It’s a good backup plan
It’s not a given that you’ll have to claim Social Security once you retire. If you have a lot of savings, you may be able to withdraw money from your 401(k) or IRA and wait to start claiming Social Security to get a higher benefit.
But often people retire and immediately sign up for Social Security. That’s something you might not plan to do until you reach full retirement age. But sometimes plans can go awry.
It is not uncommon to be forced to retire earlier than desired for a variety of reasons, ranging from health issues to age-related dismissal (which is definitely illegal, but also difficult to prove in many cases).
If you become unemployed at age 62, you may have no choice but to immediately apply for Social Security to keep up with your expenses. That’s why it may be a good idea to simply plan to file for benefits at age 62 when calculating your retirement figures. That way, you’re factoring in the lowest monthly benefit you can get. If you can file at any point after age 62, you’ll be able to receive more money, which will only improve your figures.
It pays to be safe than sorry
To be clear, schedule Filing for a smaller Social Security benefit and actually receiving one are two different things. If you’re still working and in good health at age 62, it may definitely pay off to delay filing until full retirement age or beyond (you’ll get an 8% increase for every year you wait to file after that point, until your 70th birthday).
The bottom line is that you should simply plan to file for Social Security at age 62, just in case you are forced to do so. If you can make your retirement spending work with a smaller monthly benefit, you will be all the happier if your actual benefit ends up being much more substantial.
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This is why you may want to plan to start collecting Social Security at age 62, despite the smaller monthly check. Originally published by The Motley Fool
