The Case for Collecting Social Security Benefits Early

The Case for Collecting Social Security Benefits Early

There are three particular reasons why it could be a smart move to file early.

As many Americans are surely aware, when it comes to claiming Social Security checks, financial experts often tout the benefits of waiting as long as possible.

However, in recent years, that advice has sometimes been turned on its head, and some experts are now even contending that filing for the benefits at age sixty-two—the earliest age to do so—will reap the highest rewards in the long run.

When closely analyzing the numbers, the math does lean on the side of waiting. For those retirees who need to start collecting Social Security benefits at age sixty-two, the maximum amount will be $2,364. But if retirees possess the financial resources to wait until age seventy to file, they would be eligible for the absolute maximum amount, which currently comes in at a rather impressive $4,194.

“Workers planning for their retirement should be aware that retirement benefits depend on age at retirement,” the Social Security Administration (SSA) says.

Still, according to finance expert Maurie Backman at The Motley Fool, there are three particular reasons why it could potentially be a smart move to file early.

A Career Ends Unexpectedly

Even after age sixty-two, many seniors would like to continue working, but sometimes, it is just not possible. Perhaps the company is downsizing or working forty-hour weeks is no longer possible.

“If you’re forced to make a surprise early workforce exit, you may have to sign up for benefits sooner. If you don’t, you might rack up costly debt just to live,” Backman wrote.

“As such, you might have to claim Social Security as an alternative to living on credit cards. And to be clear, that’s a wise route to take,” she continued.

Underlying Health Issues

It might not be something everyone is open to talking about, but people need to take their life expectancy into account when filing for benefits.

“Social Security is actually designed to pay you the same total lifetime benefit regardless of when you file. The logic is that signing up early will give you smaller payments each month, but more months of payments, while signing up later will do the opposite,” Backman noted.

“This assumption only works, however, if you live an average lifespan. And so if health issues arise as retirement nears, it could pay to claim benefits as soon as you can if you’re worried you won’t live a long or even average lifespan,” she added.

A Sizable Nest Egg

For those fortunate seniors who have amassed a multimillion-dollar nest egg, getting a monthly $2,000 check from the SSA probably won’t matter much.

In these cases, “the overwhelming bulk of your senior income will be coming in the form of IRA or 401(k) withdrawals. And so if you have the desire to claim Social Security early and use that money for things like vacations and leisure purchases, why not do it?” Backman said.

“Though claiming Social Security at age 62 will leave you with less money every month—for life—it’s not necessarily a bad idea. Quite the contrary—it could end up being one of the smartest moves you'll make for your retirement,” she concluded.

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.