When you reach the age of 62, you are eligible to receive Social Security benefits. However, just because you can begin getting them does not mean you should.
If you start your checks at 62, they will be significantly smaller than the amount you could have received if you started later. In fact, because of early filing penalties, your benefits will be up to 30% lower than what you would have received at full retirement age.
Waiting is often the best financial decision because the income reduction is significant if you choose the earliest possible Social Security benefit. But there is one situation in which I would definitely choose to receive my first payment at the age of 62.
In this situation, starting benefits at 62 would be the wisest move.
Although I would prefer to wait until at least my full retirement age – and most likely until 70 – to claim Social Security benefits, there is one circumstance that would force me to change my plans and begin benefits at the age of 62. If I needed to start making withdrawals from my investment accounts that were above a safe withdrawal rate, I would begin receiving payments as soon as possible.
When I retire, I won’t have a pension because I’ve never worked for a company that provides a guaranteed lifetime benefit. And I’m not the only one. Jobs with pensions are becoming increasingly scarce, particularly in the private sector. So, like most people, my retirement income will come from savings and Social Security.
Making certain that my savings last will be a top priority. Nobody can live comfortably on Social Security alone, because these retirement benefits are only designed to replace about 40% of preretirement income. And, to avoid depleting my savings, I intend to be conservative in deciding how much to withdraw from my accounts. My retirement account distributions will most likely be limited to 3.5 percent of my balance.
If I couldn’t stick to this withdrawal rate without Social Security to supplement my income, I’d file for retirement at the age of 62. And this is what many people should do if they are worried about their savings running out, because you would be far worse off if you emptied your accounts just to increase your Social Security checks.
I’m taking precautions to avoid ending up in this situation.
I would take Social Security at age 62 if I had to in order to avoid running out of retirement savings by relying too heavily on my investments, but I don’t want to. I’d rather save up for a larger salary later in life. I’d also prefer to postpone my benefits claim because doing so increases my chances of receiving more lifetime retirement benefits, as a slight majority of retirees benefit from waiting.
To ensure that I can afford to postpone my benefits claim, I’ve set a savings goal that will provide me with enough money in my investment accounts to support myself comfortably without Social Security for several years. I recognize that I won’t be able to work until I’m 70 (when I want to start receiving benefits), so I want to ensure that the income generated by my investment accounts will cover my expenses, allowing me to make the delayed claim I’m hoping for.
Anyone who wants to delay receiving benefits should do so to avoid being forced to begin receiving benefits sooner than planned.