Will you be forced to claim Social Security early? Here’s how to prepare

Many seniors aim to hold off on filing for Social Security until full retirement age (FRA) or even beyond. That way, they get the full monthly benefit that their earnings history entitles them to.

You’re allowed to claim Social Security starting at age 62, but for each month you take benefits ahead of FRA, they are reduced on a permanent basis. If your FRA is 67, which is the case if you were born in 1960 or later, then you’ll be looking at a 30% reduction in your monthly Social Security benefits if you sign up as early as possible (at 62). So you may want to wait until at least FRA.

But while you may have every intention of waiting, the reality is that you could be forced to claim your benefits sooner. The reason? A whopping 60% of workers are forced into early retirement, Voya Financial reports, due to factors like job loss and health issues. And if something similar happens to you, you may have no choice but to file for benefits before FRA – despite the ongoing financial hit.

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When claiming benefits early is the only way to survive

Not everyone who loses a job in their early 60s will stay out of work permanently. But let’s face it: It’s a lot harder to find a job when you’re older, especially if you look your age. Companies often hesitate to hire aging workers knowing full well that there’s a strong chance they’ll retire within a few years. As such, a layoff in your early 60s could be the death knell for your career.

Similarly, if you start experiencing health issues in your early 60s that make it next to impossible to keep up with the demands of your job, you may have no choice but to call it quits. Sure, you could try to find a flexible employer, or a job that will let you work from home if mobility is an issue, but again, that could mean starting over, and companies aren’t always so willing to take a chance on older workers.

The point? Even though you might plan to file for Social Security at FRA or later, if circumstances push you out of the workforce sooner, then you may have no choice but to claim benefits earlier. This especially holds true if you’re in your early 60s without much savings.

And that’s the case for a large number of workers. The U.S. Government Accountability Office estimates that 48% of workers 55 or older have no savings in an IRA or 401(k). If you’re in a similar boat, and you’re forced to retire at 62, Social Security could end up being the only income stream you have access to, making an early filing unavoidable.

There is a way to avoid filing for benefits early and reducing a major income stream for life: Try to save for retirement during your working years. If you find yourself forced to retire at 62 but have a $300,000 nest egg, there’s a good chance you’ll manage to get by for a few years via withdrawals from your savings, at which point you can sit tight until FRA and claim your benefits then. And if you think $300,000 is an unattainable sum, consider this: Setting aside $400 a month for 25 years will give you that amount if you invest your IRA or 401(k) at an annual 7% return, which is actually a bit below the stock market’s average.

Many people don’t plan for an early retirement, but wind up in that situation nonetheless. If you’re worried that an unanticipated career exit could force you into claiming Social Security early and slashing your benefits in the process, start funding an IRA or 401(k) as aggressively as you can, starting now. The more savings you amass, the more options you’ll buy yourself if early retirement becomes your unwanted reality.

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