I have stuck hard and fast to the rule of not taking Social Security benefits before full retirement age, or better yet, delaying for an annual 8% increase for each year past your full retirement age that you delay. Recently, I have had to realize this rule does not apply to all.
If you take your Social Security benefit between the age of 62, the earliest you can draw benefits, and full retirement age, you will have a permanent reduction of up to 30%, depending on your birth year.* That hurts. I have met with a few people this year who are over age 62, but not at full retirement age yet. What makes them unique is that they have been diagnosed with terminal illnesses.
The reason you shouldn’t wait to file for Social Security when your health is poor boils down to maximizing benefits over the course of your lifetime. Social Security is actually designed to pay you the same lifetime total regardless of when you initially file. The logic is that any reduction you face by claiming benefits early will be offset by the greater number of individual payments you collect in your lifetime, and vice versa — filing later will increase your payments, but you’ll collect more of them. This formula, however, assumes that you live an average life span. But if you pass away at a younger age than the average senior, you’ll come out ahead financially by filing for benefits as soon as you can.
Are you taking the risk that you’ll end up living longer than you or your doctors expect, thereby causing yourself to lose out on some money in your lifetime? Maybe. But you’re probably better off taking that risk than doing the opposite — depriving yourself of money you could use while you’re still alive to make your days more comfortable.
*According to ssa.gov