Very early in my career, a colleague told me about a fast-growing real estate company and suggested I buy the stock. I put $10,000 into the stock. A few months later, the company was caught casting unauthorized proxy votes on behalf of their shareholders. After another few months, they were barred from the industry, and subsequently, the company filed for bankruptcy. It was an expensive but valuable lesson: Don’t listen to people at the water cooler. They know nothing of your situation, and since you’re taking the time to read this article, they probably know less about personal finance than you do.
Social Security is an area where I see some of the most flagrantly bad advice peddled. Often, this results in people claiming benefits much earlier than they should. That said, claiming at 62 isn’t always a bad move. Below are four, non-watercooler reasons to consider claiming as soon as you’re eligible.
1. Your health isn’t great.
You may have heard people speak about “Social Security break-evens.” In English, that means that if you decide to delay benefits from 62 to 67, that’s five years when you weren’t collecting benefits. The break-even is the age at which you get back those missed payments in terms of cumulative benefits, because of the higher amount you received by waiting.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
These ages are often 78 to 82. So, if you think you’ll live until your late 80s, that’s a good reason to delay. However, if there is a health reason to think you won’t, the opposite is also true. Most financial planning software will have you enter a life expectancy and then will make a Social Security recommendation. You can build out your plan using the free version of our software.
2. You’re a lower earner.
Since Social Security rules changed in 2016, our claiming strategies have also changed. One of the more common strategies we recommend for couples now is: “Higher earner delays, lower earner gets a raise.” This means that the lower earner would turn on their benefit at 62, or at retirement, and the higher earner would delay until 70. If the higher earner predeceases the lower earner, the lower earner will step up to the higher benefit.
3. You need income.
This one is somewhat self-explanatory. If you have not saved for retirement and will be completely dependent on Social Security, you must claim once you retire.
While this is not a situation our firm is often faced with, it is, unfortunately, common in our country. Our advice would likely be to work as long as you can to try to max out your Social Security benefit and then to move to a low-cost area.
4. You’re a surviving spouse.
This is the trickiest of the bunch and the one we see most often. I mentioned earlier that Social Security rules changed in 2016. This had to do with how you can claim off of spouses’ and ex-spouses’ records. For widows and widowers, the rules still allow you to switch between benefits.
Imagine Joan’s husband died when she was 62. She has not collected her benefits yet. She can elect for survivor benefits now and delay claiming her own benefit until she’s 70, assuming it’s higher than the survivor benefits.
The cost of collecting at the wrong time is high, with benefits almost 70% higher at 70 than they are at 62. Of course, you don’t know when you’ll die, but it’s worth taking a guess, considering your whole situation, and making a decision. The person in the office next door to yours doesn’t have the necessary inputs to help you decide.
Related Content
- How to Estimate Your Social Security Benefits in Six Steps
- When to Apply for Social Security: Your Age is Key
- Proposed Change in Social Security Could Mean More Money for Retirees
- Strategies to Optimize Your Social Security Benefits
- Five Ways to Make Retirement a Little Less Scary
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).
-
QUIZ: Test Your Retirement IQQuiz Are you smarter than…everyone else? Test your retirement smarts with this quiz.
-
Where There's a Will, There's a Way Your Assets Will Be Distributed as You WishYour will is the backbone of a strong, adaptable estate plan that ensures what you leave behind goes to your selected beneficiaries. Without a will, state laws determine who gets your assets.
-
I'm a Financial Adviser: This Is What You're Really Losing if You Cut Back on Your 401(k) ContributionsMissing out on the benefits of the employer match and compounding growth could force you to work longer and lower your standard of living in retirement. Here are some alternative options.
-
Preferred Bank Stocks: The Investment Retirees (and Others) May Be Missing Out OnMost large banks issue preferred stocks that pay out fixed dividends, often with higher yields than bonds. Should you make room for them in your portfolio?
-
Don't Let Your Equity Compensation Trip You Up: A Financial Expert's GuideStock options, RSUs and other executive perks can come with some serious strings attached. To avoid a nasty tax surprise, you need a plan.
-
The Spendthrift Trap: Here's One Way to Protect Your Legacy From an Irresponsible HeirA spendthrift clause in an estate plan can protect an inheritance from a financially irresponsible child's debts and poor decisions.
-
Adapting to AI's Evolving Landscape: A Survival Guide for BusinessesLike it or not, AI is here to stay, and opting out could be disastrous for your organization. Instead, focus on what you can control and be flexible, as AI is still evolving.
-
Striking Gold (or Gas): A Financial Pro Unpacks the Nuances of Energy InvestingInvesting in the energy industry, particularly oil and gas, involves understanding the facts about how projects generate returns through cash flow and long-term asset building, while also being aware of the risks.
-
Escaping the New Golden Handcuffs: A Financial Expert Has a Plan for Today's ExecutivesFeeling stuck in your job? It could be your complicated compensation package, but it also could be where you live, your family or even how you view yourself.
