5 Reasons to Claim Social Security Early (Even at Age 62)

Lots of people say that you should delay your Social Security as long as possible, possibly even deferring all the way to age 70. But for millions of Americans, that could be terrible advice. In fact, there are some very real reasons why claiming as early as age 62 may make sense.

Welcome to the channel. This is the Carolina Retirement Club. My name is Michael Baker, and for nearly two decades I've been helping couples prepare and plan for their retirement with clarity and confidence. Social Security is one of those topics that everyone has an interest in because if you've been working and paying into the system, you're likely entitled to a benefit, and most people want to get the maximum benefit that they possibly can.

But, there are some circumstances where we have to think about what's the best overall solution for you, and the traditional or conventional wisdom doesn't make sense. So today I'm going to cover five specific reasons why you might want to consider claiming or starting a benefit sooner rather than later.

Let's dive in.

Reason #1: You Need the Income

There is no rocket science here. Sometimes when you're putting together your retirement income plan, you're mapping out your cash flow resources and your sources of income from various places, plus your financial assets along with what you need for your budget. You may just need to turn on the income because you need the cash flow.

If you can't see a viable path for starting your retirement years without also turning on Social Security, that may be a scenario where you have to claim your benefits a little bit earlier than later.

Reason #2: You Have Health Concerns

Of course, we all want to be healthy, happy, vital, and vibrant going into retirement; but for some of us that isn't possible. We've had a bad health diagnosis or something that's happened that's impeded our health.

Maybe we're concerned that we can't work or continue to work or couldn't work part-time, and we're going to need some income.

Or more importantly, when we start thinking about health and longevity, you're thinking, "If I don't claim now, I may never get any benefits from the system." That's a legitimate reason to really consider claiming your benefits early.

Reason #3: Coordinated Spousal Planning

Now there could be a lot that goes underneath this umbrella, and if you've watched any of the videos on this channel, one of the things that we are huge on is planning. Social Security and coordinating spousal benefits is a huge component of retirement income because there are so many different combinations to consider based on which spouses worked, your work history, the income benefit levels, and the surviving spousal benefit. There are multiple factors to consider.

So when you start looking at an overall coordinated plan where you have spousal benefits to consider—two different income streams and the timing of the claiming decision—in some cases it could make sense to go ahead and turn on one of these benefits earlier than later.

In fact, we've seen this a lot with couples where we have one large benefit that we want to protect because it's going to be the large benefit for the household, which also means it's going to be the surviving spousal benefit. That's a benefit that we want to protect, and depending on the specific circumstances, the income needs, and overall plan wants and desires, in some cases that may mean that we want to go ahead and turn on the other benefit, possibly even as early as age 62, just because it generates some extra cash flow.

We go ahead and begin receiving those benefits and having that cash flow come into the overall plan. This is a big one. If you're looking at coordinating spousal plans or spousal benefits, it could make sense to claim one of those benefits early.

Reason #4: Longevity Management

Now, this can maybe tie into the other reason I gave about healthcare, but in some cases there are folks who are relatively healthy, but longevity just does not run in the family. They are absolutely convinced that they are not going to live into their eighties or late eighties.

Again, as a planner, I tend to err on the conservative side of things. But when you start looking at somebody's longevity, their family history, their family tree, there are people that make a pretty compelling case that they don't have a lot of longevity.

Understanding Social Security's Design

This is one of the things about Social Security that everyone should be aware of: Social Security itself is designed to be actuarially fair, which means that if you start claiming your benefits early, the people who designed the system know that you're going to receive more payments for a longer period of time. This is why they reduce the payments if you claim early, and if you delay or defer the payments, those checks get larger. It's designed for you ultimately to be getting the same amount of income from the system around your life expectancy.

A lot of people do this math—it's called the break-even math—to see what age they need to live to where they would break even if they claimed benefits at certain ages. There's nothing wrong with this per se, except that it could lead to some suboptimal claiming decisions.

However, if you're looking at longevity and you're concerned specifically about your longevity, and there are other considerations that don't necessarily apply, or you've thought about spousal coordination, you've thought about other sources of cash flow or ways to possibly defer Social Security and taxes—if you've looked at all of these other decisions and you've considered them, then longevity could be one that tips the scales to you claiming a little bit earlier so that you can maximize the benefits received from the system.

Reason #5: Lifestyle and Investment Preferences

Reason number five is going to sound like a cop-out, but it is not. Reason number five is lifestyle and investment preferences. I tell people all the time that what we want to optimize for is happiness. We want to optimize for living life to the full. Yes, we can get our spreadsheets out and we can calculate things down to the hundredth decimal percentage point. But most people don't live their life that way.

We want experiences. We want time with family. We want time with friends. We want to have memories, and we want to live and enjoy our lifestyles while we can. So when you start looking at the entirety of putting together a retirement income strategy, Social Security is one of those pieces. Now, of course, we want to make a good claiming decision, but a good claiming decision could be very relative to what you want to accomplish.

Perhaps there are certain things that are important to you. Maybe you've done an amazing job of saving and investing. Maybe you're not worried about deferring Social Security until age 70 because you're going to have other resources available to you. So one of the things you're thinking about is, "We want to go ahead and use some of these dollars now. Turn on some of this cash flow now so we can enjoy it, and we want our investments to continue to grow or continue to defer and compound in our accounts."

Again, we want to coordinate Social Security within the context of a plan. But it's very valid to think about your overall lifestyle preferences and exactly what you want your money to do for you. This may mean you get the opportunity to retire a little bit earlier or to do some extra travel. Retirement is about trying to maximize lifetime enjoyment and live your life to the full. We just want a plan that we can execute to make that happen.

The Bottom Line

So there they are: five legitimate reasons to consider claiming Social Security a little bit early. If you need the income, if you have health concerns, if you're doing it within the context of a spousal coordinated strategy, if you've got longevity concerns, or if you've just thought about it, you've considered your options, and you say, "For us and for our lifestyle and investment preferences, we're going to go ahead and claim a little bit early because it allows us to maximize our lifestyle."

What do you think? I'd love to get your thoughts on the right time or the optimal time for you to claim Social Security. And if Social Security is still one of those mysterious subjects, you're confused about your options, or you're just not quite sure what the best path forward would be, schedule call with our team today.