Should You Claim Social Security Early?
As retirement approaches, many individuals start to think about when they should claim their Social Security benefits. While the official retirement age for full benefits is currently 66 or 67, depending on your birth year, you can start claiming as early as 62.
The decision to claim Social Security should not be taken lightly, as it can significantly affect your overall retirement income and financial stability. Claiming early may result in a reduced benefit amount for the rest of your life. This blog post will discuss six reasons a retiree may want to consider claiming Social Security early. (Looking for an article on reasons to delay Social Security? Please read my article here.)
First, let’s discuss two common fears people give for claiming Social Security early.
Fear of Death
Uncertainty can be unsettling, and one of the most unsettling things about life is death. But it’s important to have a rational discussion about your life expectancy. I’ve spoken with many retirees about claiming social security, and all too often, I hear some variation of, “Claim as early as you can because tomorrow is not promised.”
Don’t get me wrong. I agree with the underlying sentiment that tomorrow is not promised. However, I feel it’s essential to make rational decisions about money and retirement. Someone’s anecdotal story about someone they knew who worked for 45 years only to die on day two of their retirement should not carry much weight in your decision. What are YOUR goals? What is YOUR fitness and YOUR family’s health history? And most importantly, how does this decision fit into YOUR individually crafted retirement plan?
Fear of Social Security Going Bankruptcy
A quick search of the LA Times archives shows that Congress has been discussing cutting Social Security since at least 1985. (Back when the federal deficit was an eye-popping $200B. Oh, how we pine for those halcyon days of fiscal restraint!) We’re 40 years into the drumbeat of cutting Social Security, but it is still here.
At some point in time, changes to Social Security may occur. But don’t make a personal financial decision based on fear. No one can predict when these changes will happen, if ever.
Now that we have addressed 2 of the most common, fear-driven reasons people claim Social Security early, let’s review four reasons people may use to answer the question, “Should I claim Social Security early?”
Should I claim Social Security Early If I Have Health Issues?
One of the main reasons a retiree may want to claim Social Security benefits early is due to health concerns. If you have a chronic health condition or are facing a severe illness, it may make sense to start claiming your benefits as soon as possible. Doing so will provide you with a steady stream of income to cover medical expenses and other daily living costs.
Should I Claim Social Security Early If I Lost My Job or Am Forced To Retire Early?
Life can be unpredictable, and sometimes, circumstances may force you into an early retirement. If you suddenly find yourself without a job, claiming Social Security benefits can help bridge the gap. It can also provide increased financial stability if you must retire earlier than planned.
Should I Claim Social Security Early To Increase My Quality of Life?
Many retirees dream of traveling and pursuing their passions in retirement. By claiming Social Security benefits early, you will have a lower monthly benefit amount, but you may be able to enjoy your retirement years to the fullest. This could be especially beneficial for those with a limited life expectancy or who do not have other sources of income.
Should I Claim Social Security Early If I Have Financial Need?
For some retirees, claiming Social Security benefits early may be necessary due to financial need. If you face unexpected expenses or have limited retirement savings, receiving your benefits can provide much-needed income and help meet your basic needs. While saving for retirement and planning accordingly is essential, sometimes circumstances may require you to claim benefits earlier than initially anticipated.
Remember, claiming early may result in a reduced benefit amount for the rest of your life. It is critical to carefully evaluate your financial situation and consider all available options before making the decision. If possible, seek advice from a financial advisor or retirement planning professional to help you make the best choice for your unique circumstances.
Please do not make this decision based on fear alone.
By understanding the potential reasons for claiming early, you can make an informed decision that will help you achieve financial stability and a satisfying retirement. So, if you are considering claiming Social Security benefits early, explore the reasons and, in the context of a comprehensive retirement plan, make the decision that is right for you.
About the author:
JP Geisbauer is a Certified Public Accountant, a Certified Financial Planner ®, and the founder of Centerpoint Financial Management, LLC, a financial planning, investment management, and income tax planning firm located in Irvine, CA. JP Geisbauer is dedicated to helping California-based business owners and executives transition into retirement. He has been quoted in many news outlets including Forbes, Newsweek, US News & World Report, MarketWatch, YahooFinance, CNN and NerdWallet.
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Disclaimer:
This article is for general information and educational purposes only. Nothing contained in this article constitutes individual financial, investment, tax, or legal advice. Before taking any action on any topic discussed in this article, consult with your own financial planner, investment advisor, tax professional, and/or attorney for advice on your specific situation.