When it comes to signing up for Social Security, you get a nice amount of freedom. You can begin taking benefits as early as age 62, or you can delay your filing all the way until age 70 for a higher monthly payday.
In fact, you don’t even have to claim Social Security at age 70. There’s just no financial incentive to delay your filing beyond then.
Now you should know that once you reach full retirement age, you’re entitled to your complete monthly Social Security benefit based on your personal earnings history. And that age is 67 for anyone born in 1960 or later.
Filing before full retirement age means filing early and accepting a lower monthly benefit for life. And the earlier you file, the more of a hit your monthly benefit will take. So if you sign up at age 62, for example, you’ll lose 30% of what you would’ve received at a full retirement age of 67. If you file at 64, you’ll only lose 20% of your monthly benefit in that scenario.
Clearly, reducing your monthly Social Security benefit for life carries some financial risk. But here are a few reasons to take benefits early despite that hit.
1. You can pursue a second career sooner
Maybe you’ve spent your entire life working as an accountant when you always wanted to do something more creative, like paint or write jingles. Claiming Social Security early could make it possible to pursue a different career at a time when you still have the energy and drive to be successful at it.
2. You can start a business that serves you well throughout retirement
Starting a business is a bold move – and one that’s apt to require a lot of time and dedication. By claiming Social Security early, you’ll give yourself seed money to get that venture off the ground. And just as importantly, you’ll also buy yourself the option to dive into that business rather than have to juggle it alongside a full-time job.
Not only might running a business be a fulfilling thing to do when you’re older, but it might be very lucrative. So while you’ll shrink your Social Security benefits by claiming them early, you might more than make up for that over time if your business does well enough.
3. You can focus on improving your health
Working a full-time job doesn’t always mean letting your health suffer. But full-time work can be stressful and leave you with little time for things like sleep and exercise.
Claiming Social Security early might allow you to transition to part-time work at a younger age so you can focus on taking good care of your health. And that might, in turn, spare you a host of medical bills later on.
The decision to claim Social Security isn’t one to rush into. So think carefully about your filing age no matter what. At the same time, you should know that while filing early does mean reducing a key income stream for life, you may find that claiming benefits before full retirement age is the right move for you.
