401kRollover Blog

Why You Should Take Social Security at 62


As part of your taxes, you pay into social security, which is the primary source of income for most elderly citizens. You can start collecting social security at 62, but with a reduced income.

Despite the reduced pay, about one-third of US citizens collect social security early. Here are a few reasons why you may want to take social security at age 62 instead of waiting until your full retirement age.

You Need to Cover Current Expenses

One of the most common reasons to take social security at 62 is to cover your current expenses. This may include hefty medical expenses or mortgage payments. 

About 40% of retirees end up going back to work. Retirees often go back to work due to the need for more income. Taking social security could help you avoid returning to work.

You Suffer From Chronic Health Conditions

While many people do not like discussing mortality, your life expectancy should factor into your retirement decisions. A study at John Hopkins University found that those people with multiple health conditions at retirement age live an average of 7.7 fewer years compared to healthy retirees.

The chronic conditions mentioned by researchers include heart disease, strokes, cancer, kidney disease, and Alzheimer’s disease. With a shorter life expectancy, you may not want to wait to start collecting what the government owes you.

You Need More Money Early in Retirement

Along with social security, many Americans rely on retirement savings from 401(k)s, pension plans, IRAs, and individual investments. Depending on your retirement goals, you may want to hold off on withdrawing from your retirement savings and start relying on social security.

You may also decide that you could use the money now to fund your retirement activities. If you are healthy and want to travel or pursue hobbies, social security payments may help.

You Think You Can Achieve a Better Return

Savvy investors may try to achieve a better return with their social security income by collecting it at 62 instead of their full retirement age. 

Taking social security at 62 instead of your full retirement age results in a penalty. If you were born in 1959, you turn 62 in 2021 and receive a 29.17% reduction in your social security. Those born after 1959 receive a 30% reduction. 

While you receive reduced income, smart investments may offset the loss and potentially result in a better return. Keep in mind that investing money comes with risk and most investors scale back their risk in their later years. 

You Worry That Social Security Will End

Social security is constantly under threat. Politicians continue to debate how to fund the social security program while claiming that it will remain available to every citizen. Despite what politicians claim, social security funds may run out in the coming decades.

The threat of cuts to social security leads many people to consider taking their pay early. Claiming your benefits now could keep you from staying up worrying about the future of the social security program.The bottom line is that taking social security at 62 is often the only choice for American retirees. Your social security income may be cut by 30%, but other retirement savings like IRA’s or 401k’s can help compensate for the reduction. If you need the money now and your over 62, it is yours to take.

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