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3 Reasons It's Smart to Take Social Security Benefits at 62

Pop quiz! At what age do most people start collecting their Social Security benefits? You might assume that it's 65, as that has long been the age at which retirees could collect their full benefits. (Note that for most folks today, the full retirement age has been upped to 66 or 67.) The answer, though, is 62 -- the earliest age at which Social Security retirement benefits are available.

Why 62? Well, in many cases, people end up not having a choice regarding when they retire. According to the 2017 Retirement Confidence Survey, 48% of retirees left the workplace sooner than they had planned to -- with 41% of them doing so because of health problems or disability, 26% citing company downsizings or closures, and 14% having to care for a spouse or other family member. Of course, plenty of retirees retired early because they wanted to -- that was their plan.

Image source: Getty Images.

Here are three reasons why you might want to claim Social Security at 62, too.

1. File for benefits at 62 in order to retire early

Perhaps the most obvious reason to claim your Social Security benefits at 62 is because it can allow you to retire early -- and most of us would love to do that.

After all, the sooner we retire, the sooner we can tackle those fun activities that we've long meant to do, such as driving across the country slowly, taking long vacations abroad, learning to sail, or taking history courses at the local college. Early retirees often can enjoy their money more, being younger, healthier, and more able to travel, enjoy recreation, and so on.

Of course, you also want your money to last for your entire retirement, which is why many people assume they can't retire anytime soon. They think they haven't socked away enough money. That certainly is the case for many folks. According to the 2017 Retirement Confidence Survey, about 24% of workers said they had less than $1,000 saved for retirement, and a whopping 55% had less than $50,000. Only 20% had socked away $250,000 or more -- and even that sum won't go as far as you might think it would.

Still, there's a decent chance that you can actually afford to retire early -- or at least earlier than you originally planned. You may have to get more aggressive about saving and invest your money more effectively. Take some time to devise a plan, estimating how much income you'll need in retirement and how you'll get it. Here's how much you might amass, depending on how far from retirement you are, if your money grows by an annual average of 8%, which is a reasonable assumption based on historical market returns:

Growing at 8% for...

$10,000 Invested Annually

$15,000 Invested Annually

$20,000 Invested Annually

3 years

$35,061

$52,592

$70,122

5 years

$63,359

$95,039

$126,719

10 years

$156,455

$234,682

$312,910

15 years

$293,243

$439,864

$586,486

20 years

$494,229

$741,344

$988,458

25 years

$789,544

$1.2 million

$1.6 million

Calculations by author.

You might deploy some or much of your nest egg to buy fixed annuity income, and you might park a bunch in healthy and growing dividend-paying stocks, too. A $300,000 portfolio with an average dividend yield of 4% will generate $12,000 per year -- $1,000 per month. There are ways to increase your income while you're in retirement, too.

Image source: Getty Images.

2. File for benefits at 62 because it's a wash

You might be thinking to yourself that retiring early sounds great, but it means getting smaller Social Security checks. It is true that you can delay starting to collect your Social Security benefits until age 70, and the longer you wait, the fatter those checks will be. Indeed, for every year beyond your full retirement age that you delay, up to age 70, your benefits will increase in value by about 8%. Delay from age 67 to 70, and you can make your checks fully 24% bigger. If you would have started collecting $2,000 per month ($24,000 per year) at 67, you can instead start with $2,480 per month (or nearly $30,000 annually).

That can make it seem like a no-brainer decision to delay collecting for as long as possible. But hold on -- because you're forgetting that if you delay collecting from age 67 to 70, you miss out on three years' worth of checks -- that's 36 checks. So yes, your ultimate benefit checks will be bigger, but there will be fewer of them. For the average retiree, whether you start collecting at age 62, 67, or 70, it's actually a wash.

As the Social Security Administration has explained, "If you live to the average life expectancy for someone your age, you will receive about the same amount in lifetime benefits no matter whether you choose to start receiving benefits at age 62, full retirement age, age 70 or any age in between."

Of course, if your family members tend to live very long lives, and you're not feeling any rush to leave your job, it can make sense to delay starting to collect. If there's a good chance that you'll live an average-length life, though, starting to collect early can be worthwhile.

Image source: Getty Images.

3. File for benefits at 62 because you can change your mind later

Finally, rest assured that your decision regarding when to start collecting benefits won't be carved in stone. You can change your mind.

Changing your mind isn't a simple matter, but it can be done. Here's how: If you file to start collecting benefits at age 62 and then at age 63 decide that you want or need to re-enter the workforce, you can pay back the money you received from Social Security and then file to start collecting benefits again at a later date. There are some other rules, too -- such as the fact that you can only do this once and you can only do it within 12 months of claiming your benefits. Also, if anyone else is collecting benefits based on your income record (such as your spouse), they will have to consent to your plan.

There's another workaround, too. Social Security reduces your Social Security check by $1 for every $2 you earn in income from working above $16,920 if you're under your full retirement age. If you're at or older than your full retirement age, your benefits are docked above $44,880. (These numbers are for 2017.) Thus, much of your benefits will be withheld -- not denied -- if you work significantly after claiming benefits. What happens to that money? Well, it's used later to increase the size of your monthly payments.

So give some consideration to the idea of retiring early. Crunch your numbers and see if you might be able to make it work. Even if starting to collect Social Security benefits at 62 seems impossible, you still may be able to start collecting them earlier than you initially planned. (Remember, too, that there are strategies you can employ in order to maximize your Social Security benefits.)

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