The decision about when to claim Social Security is one of the most important financial choices you’ll ever have to make.
Many people claim Social Security as early as they can. But depending on your situation, that may or may not be the right move for you.
Who should claim Social Security at age 62?
About four in 10 Americans take Social Security at age 62, which is the earliest you can claim your benefit.
But for every year you wait past 62, your benefit climbs by roughly 8% a year. That’s why money expert Clark Howard has long recommended that you wait until 70 to collect your Social Security.
Benefits no longer grow after age 70. Yet, only only three out of every 100 people are willing or able to wait until 70 to file for benefits.
"I've stated very strong opinions about when you should collect Social Security," Clark said during a recent Q&A session on Facebook. "And people are fired up and angry with me about when I've said you should take it."
Given Clark’s belief you should wait until 70 if you’re able to, let’s pose the opposite question: Who should claim their benefits at 62?
Those who are physically unable to work
Even if you are in the minority that wants to work until age 70, life can get in the way of your plans. You may find yourself physically unable to do your job once you get into your 60s.
If that’s the case and you can no other savings to support yourself, you’d likely be a good candidate for taking Social Security as soon as you can at age 62.
Meanwhile, if you are disabled, hopefully you have a private disability insurance policy that can help out, too.
In one respect, disability insurance is more important than life insurance, because your odds of being disabled are far greater than your odds of dying during your working years.
You can visit WhatsMyPDQ.org to assess your "personal disability quotient" (PDQ). It's a free service of the Council of Disability Insurance. Your PDQ will predict the likelihood of you needing to use disability insurance during your working lifetime.
It’s best to get a disability policy that begins making payments three or six months after you are disabled and continues until age 65. Clark advises buying coverage that’s equal to 60 percent of your current pay before taxes, because that will approximate what you’re taking home after taxes.
If you’re laid off and your future job prospects don’t look promising
Age discrimination in the workplace is illegal, but that doesn’t prevent it from happening to those who are generally 50 or older.
Yet we may be undergoing a big shift on the job front, with more and more employers rediscovering the benefits of mid-career professionals.
Case in point: There's a new breed of paid internship called a "returnship" geared toward returning professionals who have been out of the workforce for some years.
Some 160 companies have returnship programs to cater to older workers who want to get back on the job. These paid programs typically run between three and four months and consist of some technical training, soft skills training and one-on-one interaction with a mentor.
After that, you can get a full-time job and re-enter the workforce with the company who sponsored the returnship.
That’s a best-case scenario situation. However, if there are absolutely no prospects for you after a layoff and you have no savings, you may be a a good candidate for taking Social Security as soon as you can at age 62.
Addressing the big fear: Social Security won’t be there for me
It’s a common misconception that Social Security will be going away completely — particularly if you’re younger.
"There is a minor train wreck underway with Social Security. We're not being taxed sufficiently to ensure the benefits that people expect with respect to Security. And we're being way undertaxed when it comes to Medicare." – Clark Howard
So does that automatically mean Social Security is going away?
Not really, says Clark. But it does mean you have to adjust your retirement-savings strategy, particularly if you’re under 50.
“If nothing changes — and that’s a big ‘if’ because there could be changes down the road — Social Security will not run out of money. But if you are much younger, it does mean your check will be less generous,” the consumer champ notes.
“So if you are in your 20s, 30s or 40s, you’ve got to rely on me, myself and I. That means increasing the amount of money you save for the future so you’re not relying on some government program.”
What if you’ve already taken Social Security at 62?
Don’t do the guilt trip on yourself if that’s the case, Clark would tell you. What’s done is done and the situation is what it is.
If you have claimed your benefit at age 62, the money expert suggests that you work part-time up to the amount you’re allowed to earn each year.
For 2018, you can earn up to $17,040 without it impacting your Social Security check adversely.
“I remember so well being in a hotel shuttle in Fort Lauderdale, and the driver of the shuttle was telling me he only worked the number of weeks per year until he hit that amount,” Clark says. “And that was it for him for the year. The rest of the year he just played.”
The final arbiter on the tough question of whether or not you should take Social Security at 62 should be the numbers.
There are a variety of online tools, both free and paid, where you can run the numbers yourself and get an answer specific to your situation.
For example, AARP's calculator lets you pop info in, then gives you a decision tree to walk you through the process of figuring out when to claim.
MaximizeMySocialSecurity.com, meanwhile, is a $40 annual subscription tool that gives you access to sophisticated software to help determine the best time to start receiving your benefits. There's a money-back guarantee if you aren't satisfied with the service.
More Clark.com stories about Social Security:
- The #1 Social Security mistake people make is so easy to avoid
- 14 things to know about Social Security in 2018
- How to replace a lost Social Security card