The age at which you sign up to collect Social Security will determine how much money you're entitled to each month. Your initial monthly benefit is calculated based on your earnings during your 35 highest-paid years on the job, but once that benefit is established, you have the power to raise it, reduce it, or keep it where it is.
If you file for Social Security at your precise full retirement age, or FRA, you'll get the exact monthly benefit your earnings history entitles you to. (FRA is either 66, 67, or 66 and a certain number of months.) Meanwhile, you can claim Social Security ahead of FRA for a reduced benefit starting at age 62 or delay your filing past FRA and grow your benefits by 8% a year, up until the age of 70.
From a cash flow perspective, filing for Social Security on time or beyond FRA makes the most sense. That way, you don't face a reduction in your monthly benefit. But depending on your job situation, it could pay to file for benefits sooner. In fact, here are three job-related reasons it pays to sign up for Social Security ahead of FRA and take that monthly hit.
1. You've lost your job
Many older workers are forced out of a job due to downsizing, changes in management, or even ageism (which, to be clear, is illegal, but enforcing that rule can be easier said than done). Of course, the problem with losing a job later in life is that you may struggle more so than a younger worker to get hired again.
Companies are often hesitant to take a chance on older employees for fear that they'll invest time and money into training, only to have those workers retire within a year or so of their hiring dates. If you've been let go and finding a new job has been a struggle, then you may, frankly, have to sign up for Social Security before FRA arrives.
2. You hate your job
Maybe you have the option to keep doing your job, but it makes you miserable. If that's the case and you've saved reasonably well for retirement, then you may have earned the right to leave the workforce a few years ahead of schedule. That way, you won't have to drag yourself to a job you hate when you'd rather be golfing or spending time with family.
Along these lines, claiming Social Security early could enable you to pursue another job, like a business you run yourself, that you don't despise. That way, you'll continue earning money, but you'll have the flexibility to fall back on Social Security if it takes a while to get that venture off the ground.
3. Your job is bad for your health
If your job is extremely stressful, it could constitute a health hazard, especially if you have underlying conditions that stress is known to exacerbate. Once you reach a certain age, you need to be honest with yourself about your physical well-being, and if your job has the potential to impact your health in a negative way, it makes sense to claim Social Security early so you can leave.
The same holds true if your physical working conditions put you at risk of health issues. For example, many older workers don't have jobs that can be done remotely, and right now, during the coronavirus pandemic, that's a dangerous thing. Filing for Social Security so you can leave your job could therefore prevent you from falling ill and suffering long-term repercussions.
Claiming Social Security early isn't a decision to take lightly. But in these scenarios, it's a move that certainly makes a lot of sense.
