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Fact or fiction: Filing for Social Security at 62 is always a bad idea.
Most of the information and “advice” you find online makes the case that delaying your filing is always the right thing to do. There’s good reason for that: filing for Social Security at 62 means taking reduced benefits.
But it’s not true that filing at 62 is always a bad idea. This decision is highly dependent on your own personal set of factors.
You may hear people say things like, “you should always wait until you’re full retirement age for file for maximum amount of benefits.” Filing later for Social Security benefits does mean maximizing income in most cases — but that doesn’t apply to every situation.
In fact, there are five specific circumstances when I think filing early makes the most sense. Here they are.
#1 – File at 62 If You Need the Income
There’s not a lot to think about here. If you’ve left your job, plan to retire, and need this income, you just need to go file.
A lot of people leave work long before they actually want to leave. In fact, the Employee Benefit Research Institute did a study in 2016 and found that among those retiring, 46% were retiring before they wanted to.
55% of those individuals were leaving because of a health concern or disability. 24% were leaving because the company that they were at was either downsizing or going away completely. Another 17% of respondents were leaving work to care for a spouse or some other family member.
Let’s take a moment to pause and talk about the 55% of individuals who have left work because of a health issue or disability. If this describes your situation, you probably need the income benefits could provide to you… but make sure you file for the right benefits.
What does this mean? Before you go and file for Social Security retirement benefits, you need to thoroughly investigate whether or not you qualify for Social Security disability. Here’s why:
Assuming your full retirement age is 67, if you file for those retirement benefits at 62, you’ll receive around 70% of your full retirement age benefit amount. If you file for disability and are awarded those benefits, the amount that you would receive would be 100% of your full retirement age benefit, even at 62.
Where and how you file can make a big difference for you and the income you receive. If you’re leaving work because of a disability or because of a health issue, take the time to compare both sets of benefits.
If you qualify for disability, your benefit may be higher than if you file for regular Social Security. Knowing what you qualify for could mean the difference between maximizing your retirement income, and falling short.
If you’d like to read more about this, see my article Should you file for Social Security Disability or Retirement? 3 Things to Consider
#2 – You’re Single and Have Health Issues
If you’re single and have health issues, you may just want to use a simple break even analysis. This calculation compares what you’ll receive in cumulative lifetime benefits for filing at various ages.
For example, if you’re trying to compare filing at 62 versus 67, it tells you that you need to live longer than age 78 for filing at 67 to make sense over filing at age 62.
You can run all sorts of age combinations in these calculations, but if you’re single and have health issues, this is probably where filing early makes the most sense because you’re not worried about increasing survivor benefits or the host of other factors that married individuals have to worry about.
For more information on this specific topic, check out this great article on the break even analysis at dummies.com
#3 – Spousal Issues
There are a few factors that your spouse’s earnings and health contributes to making this decision. Here are the two that I see most often.
Your spouse is the higher earner and has health issues
The first is if your spouse is the higher earner and has health concerns. If your spouse had higher earnings than you, that means their Social Security benefit is going to be higher than yours.
If they’re also in poor health and have a shortened life expectancy, that means the higher benefit they receive will most likely become your benefit when they pass away. That’s thanks to the survivor’s benefit.
If that’s the case, there’s not much reason to delay your benefit for years down the road just so you can get a higher benefit for the rest of your life, because you’ll most likely start getting that survivor’s benefit at some point in the future.
Your spouse is the lower earner and older than you.
If your spouse is older than you and their own benefit is not as high as the amount they can receive as a spousal benefit, it could make sense to file and open up your work record to pay a spousal benefit to them.
When you compare the total amount of cumulative benefits that you could both receive, it may make more sense to do it this way.
For example, assume your spouse has already attained full retirement age and her benefit from her work is $400 per month. You are only 62 but your full retirement age benefit is $2000.
By filing now you’d allow your wife to begin collecting the full spousal benefit of $1,000. Yes, you’d get a reduced benefit of around $1,500 for the rest of your life — but the cumulative amount of benefit received over your lifetime could be greater for filing early.
#4 – You Are Eligible for a Survivor’s Benefit
This strategy is highly dependent on the math. It could make sense to file for your survivor’s benefit as early as age 60, and then switch to your own benefit down the road up until age 70.
Let’s walk through an example and see how this would work.
Say your own Social Security benefit at full retirement age is $1,500, and the survivor’s benefit that you’re eligible for is $1,750. If you file early, you know there will be some reductions that come into play, so your own benefit would be $1,050, and the survivor’s benefit would be $1,394.
Here’s the way this switching strategy would play out:
You would file for survivor’s benefit at age 62 (and remember you can file for that benefit as early as age 60 or even 50 if you’re disabled, but to keep everything the same, I want to use age 62 here). You’d then start receiving $1,394 in benefits per month, and then at age 70, you’d switch back to your own benefit.
Because your benefits increase every year between age 62 and 70, your benefit would be $1,860, and that’s not including any cost of living adjustments.
#5 – If You Have Minor or Disabled Children at Home
If you have children, eligible grandchildren, or even a spouse providing care for these children at home, these family members may be eligible for a benefit. Just know you will have to file first!
There’s a rule that states that before benefits can be paid to anyone off of your work record, you have to be receiving benefits.
When combined with your benefits, the benefits to children and your eligible spouse can be up to 180% of your full retirement age benefit. So if you have children at home that meet the criteria for eligibility, there’s an obvious reason to consider filing early.
Let’s look at an example to illustrate this. Say you’re 62 and your wife is 50. You have two children, ages 13 and 11.
Thanks to good savings habits throughout your working career, you don’t need Social Security income and can be flexible when you file. It might seem like it makes sense to wait to file until full retirement age, when you’d receive $2,000 (versus filing now, when you’d only get $1,500 per month).
If you lived until 90, you’d receive an additional $70,000 in benefits for delaying filing until 66 instead of filing at 62. But this doesn’t take into account the benefits paid to your children.
While your children would be eligible for benefits based upon your retirement, the kids cannot get benefits until you file. That means your family would able to collect thousands of dollars more in lifetime benefits if you file early and turn on the benefits for your kids.
That’s the quick rundown of the five scenarios in which I think it makes sense to file for Social Security as early as possible.
Now, I have to make the side note here before we leave. There’s a video that I did recently called “Three Stupid Reasons to File For Social Security at Age 62.”
It has some amusing comments if you want to go out and read those, and maybe even add your own to that, but I don’t think that filing at 62 is always right. Filing at later ages such as full retirement age or even 70 isn’t always right, either!
I think it’s highly dependent on your individual circumstances. So what does that means as far as next steps?
Do yourself the favor of getting informed about Social Security. Don’t just take someone’s word for it, and whatever you do, don’t just take the Social Security Administration’s word for it.
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I look forward to helping you with your specific challenges around Social Security so you can make the most of your retirement income and benefits.