5 Strategies for Claiming Social Security Early Without Regrets
Social Security isn’t as simple as hanging up your work boots and getting a check. In fact, choosing when you wish to receive your benefits can be one of the most important financial decisions of your retirement.
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While the Social Security Administration defines “full retirement age” as 67 for those born in 1960 or later, you can actually file for benefits as early as age 62 or as late as 70. While your benefit will increase by 24% if you wait to file until age 70, you’ll suffer a lifelong reduction of 30% off your full retirement benefit if you claim at age 62.
Net-net, claiming at age 70 would boost your payout by a whopping 76% over claiming at age 62. Yet, for some people, filing for Social Security benefits at age 62 can actually be the right call — although you’ll want to do so strategically.
Here are some of the ways to both maximize your age-62 benefits and to have no regrets about claiming Social Security early.
Maximize Your Income/Work Record
The best way to avoid having regrets about claiming Social Security early is to get the highest possible benefit you can. The SSA uses a complex formula that takes into account your 35 highest-paid working years and the age at which you retire to determine your benefit. The more you can earn over those 35 years, the more you’ll get in retirement, even at age 62.
For example, in 2023, the maximum possible Social Security benefit for those claiming at age 70 is $4,555. At full retirement age of 67, that drops to $3,627. But if you were to file at age 62, the most you could get out of Social Security would be $2,572.
However, that’s still a significant sum of money and well over the average monthly Social Security check of $1,841. Plus, if you file at age 62, you’ll receive 60 checks — totaling over $150,000 — before you even start drawing a payout at age 67. That alone is a good reason to not regret filing for Social Security early.
It’s important to remember, however, that these examples are the absolute maximum amounts that you can earn from Social Security. According to the SSA, in any given year, only 6% of workers earn more than the Social Security maximum, and very few sustain that amount for 35 solid years. So when you make your own calculations, it’s critical to use the real-world data provided to you by the SSA to make your decisions.
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Max Out Your Retirement Accounts
Few workers can comfortably live off just a Social Security check, particularly those who file for benefits early. To avoid regret, it’s essential to have supplemental earnings available. If you anticipate that you’ll end up claiming your benefits at age 62, it should be an even bigger motivation to max out your retirement accounts, like your 401(k) plan.
For 2023, you can sock away $22,500 into a 401(k) plan, or $30,000 if you’re 50 or older. If you’re in the position to max out your 401(k) starting at age 50, it means you’ll pump in $360,000 to your account. Combined with your earnings and your employer match, even starting at age 50 you might very well end up with over $500,000 in your 401(k).
At even a modest 4% withdrawal rate in retirement, you’ll be adding roughly $1,667 to your monthly Social Security check, which may more than double it.
Work Part Time in Retirement
If you’re planning to work part-time in retirement, then claiming Social Security at age 62 may offer no regrets at all. Imagine that your full retirement benefit is $2,000 and that your age-62 benefit is $1,400. If you can earn just $600 per month by working part-time, you’ll effectively be earning your full retirement payout but with the benefit of earning those 60 additional checks from age 62 to 67.
In this way, you can essentially earn your full retirement benefit for a longer period of time.
Use Geo-Arbitrage To Boost Your Quality of Life
Although the Social Security Administration will provide you with a cost-of-living adjustment every year, the amount of your check is essentially set at the time you file. The best way to improve your quality of life on a fixed income is to lower your expenses.
Fortunately, there are plenty of ways to do that, even if you think your budget is already trimmed to the bone. Using a strategy known as “geo-arbitrage,” you can simply move to another place where expenses are lower and you’ll immediately have more room in your monthly budget.
If you were to move from Los Angeles to Dallas, for example, your cost of living would be 31% lower, meaning you could live a $50,000 lifestyle in Dallas for only $34,254.
Think of Your Early Filing as ‘a Bird in the Hand’
One way to avoid regret about an early Social Security filing is to acknowledge that your future is uncertain. If you could somehow know for a fact that you would live until 110, then filing at age 70 would make the most mathematical sense, by far. But given that there’s no way you can know when your time is going to be up, getting your money as fast as possible may be a good strategy.
There’s also the legislative side of things to consider. As currently structured, the Social Security program is in dire need of additional funding to keep it solvent past 2035. With no way of knowing which fixes the government will apply to the program — if any — having a “bird in the hand” by drawing your benefits as early as possible might be a way to reduce some of the uncertainty.
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