Best Reasons to Apply for Social Security Early

In Most Cases, It Doesn't Make Sense But There Are Exceptions

Scattered pile of Social Security cards

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Let’s be clear — in most cases, filing for Social Security at age 62 is a bad idea, but let’s stay on the positive side of things. There are some reasons you might want to apply early.

Serious Illness

Sorry, we said that we would stay positive, but a serious illness is nothing to smile about. When you or a loved one is sick, most rules of smart financial planning are forced aside in favor of getting the person the care they need and deserve.

A single person who won’t live much longer should take Social Security benefits as soon as they can, but if the person is married, things change. If the person who is ill was a high-wage earner, not taking benefits early might make more sense because the surviving spouse stands to receive a higher benefit.

You Lost Your Job

In a perfect world, everybody would save enough for retirement that if they lose their job not long before they retire, they have enough saved in their 401(k) and IRA that they aren’t relying on Social Security income. That’s not the reality for most, however.

If you lose your job while in the final years of your career, finding a new job that pays at the level you’re used to might be a tough find. If you have no other way to live and need the Social Security income, go ahead and apply.

If you’re a younger saver, take note. This is why it’s important to make retirement saving a priority. Plan for the challenges and be happy when they don’t arrive.

You’re Out of Money

Remember that perfect world where everybody has saved a sizable chunk of their income every month for retirement? That doesn’t happen in most cases because of an unfortunate combination of low wages, personal debt, too much spending, and not enough saving. Too many people are entering retirement with next to no savings and once they’re unable to work. As of 2020, 40% of older Americans rely solely on Social Security in their retirement. Don’t let lack of financial planning lower your Social Security checks for the rest of your life.

Avoid this serious pitfall by forming the habit of saving early in life and putting off taking benefits until at least full retirement age, if possible.

Bad Advice

Go to the Social Security website and you’ll see volumes of laws, regulations and rulings. Understanding Social Security top to bottom is nearly an impossible task.

Ever wait hours at a Social Security office only talk to somebody who clearly doesn’t have a high level of knowledge? The Social Security office even says that if you want advice on how to structure your Social Security benefits and withholdings, they’re not your definitive source. (To be fair, the Social Security office doesn’t have the time or resources to gain a complete financial picture of you. Use a financial advisor for that.)

Sometimes, you do the right thing and seek out advice from somebody only to find that the advice was incorrect. You’re now left to clean up the aftermath of the bad advice. In this case, taking benefits early might be your only option.

Social Security is one of those areas where paying top dollar for expert advice is well worth your time and money. It could mean the difference between throwing away six figures of income and having it at a time when you need as large of a Social Security paycheck as you can get.

Break-Even Analysis Says Yes

According to the U.S. Government Accountability Office, “The Social Security benefit formula adjusts monthly payments so that someone living to average life expectancy should receive about the same amount of benefits over their lifetime regardless of which age they claim.”

If you’re having trouble following, that’s government-speak meaning, regardless of when you start taking benefits, the amount you receive should be the same as somebody taking benefits later. Your check is only smaller because your benefits are being spread out over more years.

Most experts will tell you that it’s not that simple but for some people, it may not be any more advantageous to wait but only a qualified financial planner can help you determine that.

Article Sources

  1. Social Security Administration. "Survivors Benefits," Page 6.

  2. National Institute on Retirement Security. "Examining the Nest Egg: The Sources of Retirement Income for Older Americans."

  3. U.S. Government Accountability Office. "Challenges for Those Claiming Social Security Benefits Early and New Health Coverage Options," Page 1.