Deciding when to claim Social Security benefits is a crucial financial decision that affects both your future income and quality of life.
While some individuals choose to stay in the workforce longer to increase their retirement savings, others may opt to start withdrawing Social Security as early as age 62.
Claiming Social Security early results in permanently reduced monthly payments, but depending on your health, financial situation, and life expectancy, it may be a smart choice for some.
Balancing Reduced Benefits with Financial Needs
This Article Includes
Retiring early and accepting a smaller Social Security check can help bridge the gap until other sources of income kick in, like retirement savings or pensions.
As Paul Tyler, host of That Annuity Show, explains, having a steady, though smaller, check can ease financial pressures, especially if your ability to stay employed is limited by job market realities or personal circumstances.
If you have access to employer-sponsored retirement accounts like a 401(k), you may be able to withdraw funds penalty-free after age 55 under the “Rule of 55,” which applies to accounts with your current employer. This can provide additional financial flexibility when considering early retirement.
Considering Health and Longevity
Your health and family history also play a significant role in deciding when to claim Social Security. Studies in countries like Finland and the UK show improved physical and mental health after early retirement, while research in the U.S. suggests that active middle-aged adults can save on healthcare costs.
If you’re in good health and have a family history of longevity, delaying retirement could maximize your Social Security benefits over time. On the other hand, if you have health concerns and may not live into your mid-80s, taking benefits earlier could reduce future financial strain for both you and your family.
Enjoying Your Retirement Savings
For those who have been diligent about saving and investing for retirement, retiring early and claiming Social Security might be a sound option. Financial planners often recommend saving enough to cover 70% to 90% of your pre-retirement income for each year of retirement to maintain your lifestyle.
Additionally, if your spouse earned more than you and is older, taking your benefits early might make sense as part of your overall retirement strategy. Consulting with a financial advisor before making this decision is highly recommended, as they can help you evaluate your specific financial situation and long-term needs.