Many Americans rely on Social Security to fund their retirement. At least half of the aged population receives 50% of their family income from Social Security benefits, and around 25% of families get almost all of their income from Social Security.
Conventional wisdom often recommends delaying benefits for as long as possible to maximize the monthly payout. However, this approach doesn’t work for everyone. For some retirees, claiming Social Security at 62, despite the reduction in benefits, can be the best decision for those who want an active, early retirement.
We’ll take a look at why you may want to draw your Social Security early and how to plan for this decision.
The Allure of an Active, Early Retirement
Some people aren’t looking forward to retirement filled with rocking chairs and quiet afternoons. Instead, you may want to spend your golden years filled with adventure. You may want to explore exotic locations or take up a new, physically demanding hobby, like skiing or rock climbing.
While this can be a very enjoyable retirement, it requires significant financial resources and retiring earlier than you might otherwise.
Travel costs are high, as you’ll need to pay for flights, accommodations, and excursions. Hobbies like woodworking, photography, and biking require a significant investment. And, let’s not forget the ongoing costs of just living. Without a steady income, it can become challenging to fulfill this lifestyle.
Claiming Early to Fuel an Active Retirement
Here’s where claiming Social Security at 62 becomes a game-changer for active retirees. While the monthly benefit will be permanently reduced compared to delaying your claim, the guaranteed income it provides creates a crucial financial foundation. While you cannot rely solely on Social Security, especially for an active retirement, knowing you’re guaranteed to get something each month allows you more flexibility with other income sources.
Claiming Social Security at 62 provides your retirement budget’s “base layer” of income. You can use this layer for essential living expenses, freeing up your savings and other income to fuel your active lifestyle.
Of course, you’ll have to run the numbers and figure out how much money you need for your basic needs. Social Security isn’t always enough to cover your basic needs, depending on what you’re entitled to.
Strategies to Maximize Early Claiming Benefits
While claiming Social Security at 62 can sound like a fantastic idea, it is important to acknowledge that claiming early does reduce your benefit amount. Here are some strategies to help you maximize your benefit when claiming early. While you cannot avoid the diminished benefit amount altogether, you can help minimize its impact on your life:
- Budgeting is Key: Like throughout much of adulthood, a budget is vital to stay financially healthy into retirement, too. You should identify how much you need and allocate your Social Security benefit to cover those things first. This ensures you know how much you can spend on adventurous activities. It also lets you know how much other retirement income you’ll need.
- Consider Part-Time Work: If you decide to start claiming early, you don’t have to stop working completely. Part-time work can help you fund your desired activities while still giving you plenty of extra time to pursue them.
- Explore Other Retirement Income Sources: The best way to overcome the diminished benefit of claiming early is to invest in other sources of retirement income. This can be a pension, investment account, or part-time work. You may decide to invest in rental properties, as well. Whatever avenue you decide to go down, these extra income sources can be what you need to fund your early retirement.
If you decide to retire early, we highly recommend considering part-time work and other income sources. With a diminished Social Security benefit, you’ll likely need another source of income.
Planning for Early Retirement
When you decide to claim Social Security at 62, you need to consider what your whole retirement will look like financially, especially if you decide not to work part-time. For every year you retire early, you’ll need a substantial increase in your income to fund that extra year of retirement.
Remember, claiming early means a permanent reduction in your monthly payment. This impacts your whole retirement, particularly if you live a longer lifespan. Don’t just consider how you’ll make up for the loss now. How will you make up for it in your 80s? You likely don’t want to work part-time forever, even if that is an easy fix in your early 60s.
Early claiming requires even more strategic planning than “normal” retirement. You’ll need to have other income sources set up and consider your projected longevity. This extra planning is stressful for many, and you may find the extra stress not worth it!
This approach isn’t ideal for everyone. You’ll need significant savings and other income sources. If you don’t have those, retiring early can be risky.
However, if you have a well-defined vision for an active early retirement and the financial resources to manage it, claiming Social Security at 62 can be a great way to start living your dream early.
Should You Claim Social Security at 62?
Whether or not you should claim Social Security at 62 depends on your individual circumstances. There are advantages and disadvantages to consider. You’ll get earlier access to income, which can be helpful if you need money right away. If you don’t need the money, you can also save it or potentially invest it.
It also provides you with extra flexibility. If you need the income for some reason in the future, you’ll already have access to it right away.
There are some massive disadvantages of claiming at 62. As discussed, your Social Security benefit will be automatically lowered permanently. Your other benefits may also be affected by your increased income. So, if you’re on any other government programs, speaking with an advisor about whether you would still receive those benefits is important.
The reduced benefit may not be sufficient to cover your expenses later in retirement, especially if you live a long life. While you may be able to counteract the lowered benefit while you still work part-time, your other income streams may taper off later on.
To figure out if claiming Social Security at 62 works for you, we recommend considering these three things:
- Your Health: If you have health concerns, it may be better to claim early, especially if your medical care is expensive.
- Your Retirement Savings: If you have substantial savings, you may be able to afford to claim Social Security early.
- Your Desired Retirement Lifestyle: If you plan on an active retirement with travel or expensive hobbies, claiming early can provide the upfront income to support those activities.
We highly recommend doing the math for several scenarios while varying your retirement age. Remember, you need to pay for your expenses now and later. Just because you can make up for the diminished benefit now doesn’t mean you’ll be able to later. Be sure to read our Social Security guide to find the best plan for retirement.
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