Most retirees rely on Social Security for at least some of their retirement income. The typical recommendation is to wait until at least full retirement age to claim, as this is when you start receiving full benefits. Some even go so far as to recommend waiting until age 70 to maximize benefits, though we have explained why waiting until 70 isn’t the smart choice for most people.

Waiting until full retirement age isn’t always the best course of action for EVERYONE, though. Some people may even benefit from claiming Social Security as early as possible at age 62.

While claiming early provides the welcome relief of a steady income stream, it comes with a significant caveat: a permanent reduction in monthly benefits. However, for some individuals facing a harsh reality – immediate financial hardship – claiming Social Security at 62 can become the most strategically sound decision.

Let’s take a look at when it may make the most sense to claim Social Security at 62.

The Allure of Early Claiming

Even the most diligent planner will sometimes come up against unforeseen circumstances, and some of these circumstances are very expensive. They might be a sudden job loss, a medical problem, or even a spike in living expenses.

All of these problems can quickly put your budget in disarray, making ends meet suddenly impossible. In these cases, the allure of claiming Social Security can be hard to resist, and for a good reason!

Claiming benefits at 62 allows you to keep your savings untouched (or at least not touched as much!). You’ll get immediate access to some of the Social Security benefits you’re entitled to based on your working history.

However, claiming benefits early also leads to a permanent reduction in your benefits. Once you start claiming, your benefits will remain permanently reduced, even after you reach full retirement age and beyond. Still, even if it is lower than what you’d receive by waiting, this benefit can provide a secure source of income when you really need it.

Before jumping to take the reduction, though, it’s important to understand exactly how it works. For every month that you claim before full retirement age, you’ll receive a deduction on your monthly benefit. This deduction is because you’re spreading the same benefit over more years, which leads to each month being lower.

The earlier you claim, the steeper this reduction. 62 is the earliest anyone can claim, so it is also the point that you’d receive your lowest benefit if you did claim. You can see just how much your benefit would be decreased by using the Social Security calculator.

Financial Hardships

Sadly, more and more seniors are finding themselves going through financial hardships. These hardships may be due to unexpected job loss or sudden medical bills. Seniors are not resistant to economic slowdowns just because they have more experience, either.

Job loss can be particularly devastating, especially late in your career. It can disrupt retirement plans and put life on hold when you don’t have that many years left to be on hold. You may even have sudden gaps in health care, leading to even more financial difficulties.

Rising living costs, especially for essentials like housing and healthcare, can also push even those who planned carefully into a financially precarious position.

These situations can all create pressing realities that can be hard to get out of. Traditional budgeting may no longer be enough, and you may find yourself backed into a corner. For many seniors, drawing Social Security early to help get out of these situations becomes a no-brainer.

Weighing the Tradeoffs

That doesn’t mean you should jump to claim Social Security at the first sign of trouble, though. While immediate financial relief can be invaluable during hardship, the permanent reduction in benefits can have a lasting impact on your retirement income. When you claim at 62, the reduction can be as much as 30% – a sizable portion of your monthly check.

For instance, let’s say your estimated monthly benefit at your FRA is $2,000. Claiming at 62 (if your FRA is 67) would result in a permanent reduction of approximately 30%, bringing your monthly benefit down to $1,400. Often, this reduction in income can be easiest to overcome when you’re younger, as you can work part-time and may have fewer medical bills. However, when you’re much older, you’ll likely have fewer ways to counteract the decrease.

Retirement can last decades, and you may have a harder time maintaining your lifestyle with this permanent reduction in benefits.

You also have to consider your “breakeven point.” This is when you start receiving more lifetime benefits by claiming early than you would by claiming later. Often, claiming earlier makes the most sense for those with a lower-expected lifespan, while claiming later makes more sense for those with a longer lifespan.

Of course, no one knows exactly how long they will live. However, it is possible to make an educated guess based on your health, family history, and the average life expectancy.

When Claiming Early Makes Sense

So, when does claiming early make the most sense? As we’ve discussed, claiming early does result in a permanent benefit reduction, but that doesn’t mean everyone should avoid it. Claiming early makes the most sense for those experiencing:

• Financial Crisis: If you cannot meet your basic needs, like food and shelter, claiming early is often the best way to meet those needs.
• Significant Stress: Even if your basic needs are met, extreme stress due to financial hardships is never healthy. Knowing you have a reliable source of income can help you overcome this stress.
• Bridge the Gap: Claiming early can provide a temporary income stream until they find a new job, secure alternative financial assistance, or implement strategies to reduce expenses. If the solution to your money problems is going to take a few months, Social Security can help you get there.

Claiming early is hardly ever ideal in the long run, though. Because of the permanent reduction in benefits, your future self may have a harder time making ends meet, especially when you can no longer work part-time.

Consider other potential income streams, such as a pension or significant savings. Sometimes, these can help make up for the permanent reduction in benefits, making it easier to claim early without serious problems later on.

YOUR Retirement Plan

Everyone is an individual, and your financial situation completely differs from anyone else’s. That’s why it’s important to consider your situation when determining if you should claim Social Security at 62.

If you’re facing financial hardships, it’s important to look for other “outs.” Your first stop should not be to claim Social Security early. However, there is no reason to put yourself into poverty when you have a guaranteed monthly check waiting there, either.

There are several specific factors we recommend looking at:

• Life Expectancy: If you have a long life expectancy, the reduced benefit will impact you more over time.
• Retirement Savings: If you have significant retirement savings, the reduced benefit may not mean as much. Conversely, if you have little retirement savings, you may need to wait longer to claim Social Security.
• Future Retirement Plans: If you cannot work due to a health condition, you’ll be unable to offset the reduced benefits by working part-time.

Consider your particular situation when deciding whether or not claiming Social Security at 62 makes sense for you.

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