Should You Claim Social Security at 62 and Invest the Money?

One of the biggest decisions you might have to make in the context of your retirement is when to sign up for Social Security. You can claim benefits as early as age 62. But the longer you wait, until you turn 70, the larger a monthly benefit you can lock in.

You’ll often hear that filing for Social Security at 62 is a bad idea, since it will mean reduced monthly benefits for life. But what if you’re a shrewd investor and you’re able to take the benefits you collect starting at 62 and invest the money? Can you come out ahead that way?

Technically, yes. But you should know that claiming Social Security at 62 to invest the money means taking a big — and perhaps needless — risk.

The difference between filing at 62 versus waiting

Before you can decide when to claim Social Security, you need to understand the impact of filing for benefits at different ages. Let’s say you’re eligible for a monthly benefit of $2,000 at age 67, which is full retirement age for anyone born in 1960 or later.

If you claim Social Security at 62, you’ll reduce your monthly benefit down to $1,400. If you wait until age 70 to file, you’ll grow your monthly benefit to almost $2,500.

The problem, of course, is that you don’t know how long you’ll live. Nobody does. So it’s hard to know the best age to claim Social Security.

If you could look into the future and see that you won’t live that long, it would probably inspire you to claim benefits at 62. If you knew you’d still be alive at 100, you’d probably wait until 70 to sign up.

Filing early to invest the money is a risk

It’s possible to come out ahead financially if you claim Social Security at 62 and invest the money. But that doesn’t make it a good idea.

The problem is that you don’t know what return your portfolio is going to deliver once you start investing your Social Security checks. However, you do know exactly what the return on waiting to claim benefits is.

For each year you wait to sign up for benefits past age 62, you’re guaranteed a boost to your monthly Social Security checks. The stock market gives you no such reassurance. You could even lose money in the stock market, depending on the investments you choose.

That’s why it’s not necessarily the best idea to claim Social Security at 62 for the express purpose of investing the money. If you want to sign up at 62 for another reason, such as to be able to leave a job that’s bad for your health, that’s different.

But otherwise, why take the risk of putting money into the stock market when there’s a completely risk-free way to grow your Social Security benefits instead?

Of course, if you end up claiming Social Security later in life and you don’t need the money for living costs, then by all means, invest it if you so choose. But that way, you’re starting with a larger monthly benefit to begin with. And that larger monthly benefit will be there for you in the event that you end up needing the money.

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