More than 4 of 10 jobs lost during the pandemic may never come back, the Becker Friedman Institute for Economics at the University of Chicago predicts. That grim statistic means many pre-retirees may not find work again. As a result, they could be pushed into early retirement, possibly creating an unexpected cash crunch.
And that raises a key question: If you're 62 or older, and you're one of the 17.8 million Americans still out of work because of COVID-19, is taking Social Security early a smart option if you need to produce fresh income to pay the bills?
“Although there are a few exceptions, this is a one-time decision that will impact you and family members relying on you for the rest of your life,” says Joel Eskovitz, director of Social Security and Savings Policy at the AARP Public Policy Institute. “Every month you delay adds value to your lifetime monthly benefit, so if you have other ways to fill the gap that don't involve huge penalties or interest rates, you should seriously entertain those options first. That said, Social Security is intended to be a safety net, and if you are in a position where you have few or no choices, claiming benefits early may be a critical lifeline to help get you through tough times."
Look at alternatives first
If possible, you should do what you can to avoid tapping Social Security early to avoid the prospect of locking in a lower monthly benefit during retirement, financial advisors and social security experts say. But not everyone has the financial cushion to avoid doing so.
The good news? If you eventually land a new job, there are options available that may enable you to boost your monthly benefit even if you opted to start receiving payments early, Social Security experts say.
"People need to understand that the decision to start collecting Social Security benefits early doesn't have to be an irrevocable one,” says Kurt Czarnowski, principal of Norfolk, Massachusetts-based Czarnowski Consulting. “Social Security enables them to tap into and receive a revenue stream to help them through periods of job loss,” adds Czarnowski, who worked 34 years at the Social Security Administration (SSA).
Still, there are pros and cons to tapping this government-funded income before you reach full retirement age, which is 66 or 67, depending on the year you were born.