Ready to Retire Early? Ask Yourself This Before Taking Social Security Benefits

A lot of people find themselves ready to retire early. And there can be serious benefits to doing that.

An early retirement gives people the chance to do things like travel when their health may be in better shape. It could also mean getting to spend time with loved ones and escape a stressful work situation.

Retiring early does not have to mean claiming Social Security early. But for some people, it does. And there can be serious consequences there. So there’s one important question you’ll need to ask yourself before taking Social Security benefits in conjunction with an early retirement.

How long do I think I’ll live?

Most people don’t have a crystal ball that can tell them how long they’ll live. But there are certain factors that increase the probability of a longer life.

If you have great health in your early 60s, then there’s a fair chance you’ll live a pretty long life. The same applies if you’re in your early 60s and have parents who are alive and well in their 90s.

The reason you need to consider your lifespan before claiming Social Security early is that you don’t want to put yourself in a position where you’re at risk of running out of money. And the longer you live, the more you risk spending down your nest egg.

Meanwhile, claiming Social Security early generally means reducing your monthly benefits on a permanent basis. And that could become problematic if you end up living a long life. It could also mean getting less lifetime income out of Social Security.

You can sign up for Social Security as early as age 62. But if you don’t wait until full retirement age (FRA), which is 67 for people born in 1960 or later, then you’ll reduce your monthly benefits for the rest of your life.

Maybe you can afford that reduction. Or maybe not. But your life expectancy should play a big role in that decision.

Run the numbers carefully

It’s hard to figure out the optimal time to claim Social Security. But as a general rule, if you don’t think you’ll live a long life, then filing early or on time (meaning, at FRA) makes sense. And if you think you’ll live a longer life, then delaying Social Security tends to make sense.

For each year you delay your Social Security claim past FRA, your benefits get to grow 8%. This benefit runs out once you turn 70. But with an FRA of 67, filing at age 70 means potentially boosting your monthly payments by 24% — forever.

So imagine you end up living until age 90 or 95. By then, it’s hard to know how much money will be left in your savings. But if you’re getting more Social Security each month, you may end up being just fine financially.

All told, it’s important to figure out what your monthly benefits will look like at different ages before making your filing decision. And you can use this tool as a starting point.

Once you have that information, you can think about your financial needs and make a more informed choice.