Could Taking Social Security Early and Investing It Be Smarter Than Waiting?

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If there’s one stalwart piece of financial advice you’ve received throughout your life, it’s that you should wait as long as possible to collect your Social Security benefits. Technically, you can start claiming benefits as early as 62, but conventional wisdom suggests postponing until at least your first full retirement age (66 or 67, depending on your birth year) — or even until you hit your 70s. The longer you wait, the higher your monthly payments will be, since taking benefits later increases the amount you receive.

It makes sense that people relying on Social Security as their primary source of income would want to delay benefits so they can receive larger monthly checks, even if those checks come for a shorter period of time. But what if you wanted to try a more creative approach to your Social Security check, like, say, investing it? Could it make more sense to start collecting benefits early so you can put that money to work in the market?

It just might be a smart move, depending on your circumstances. GOBankingRates ran a few scenarios to examine this strategy. 

What Taking Social Security Early To Invest Could Look Like 

Let’s say that you’re earning around $75,000 when you blow out the candles on your 62nd birthday cake. You estimate that if you wait until your full retirement age of 67, you’d collect about $2,100 a month in Social Security benefits. But instead, you decide to claim early and invest. 

Since claiming at 62 reduces your benefits by approximately 30%, you’d be pocketing roughly $1,470 a month. Over the next five years, until you reach full retirement age, you invest that $1,470 at an assumed 7% annual return. By the time you celebrate your 67th birthday, your investment account — consisting of the Social Security payments you’ve collected and invested between the ages of 62 and 67 — has grown to approximately $105,242. Not at all a small chunk of change. 

At this point, you’ll continue collecting your Social Security checks for the rest of your life. Let’s assume you live until age 90. From 67 through 90, you’ll receive another $405,720 in Social Security benefits.  

When you combine your total Social Security payments and the investment growth from claiming early, you’re looking at a total of $559,162. In essence, your growth from investing helps compensate for the smaller monthly checks.

What Waiting To Collect Social Security Could Look Like 

Still assuming you’re going to be rocking and rolling until age 90, let’s say you decide to go the more traditional route of waiting until full retirement age or even later to start collecting benefits.

If you wait until 67, you’ll collect around $2,100 per month for 23 years, totaling $579,600. 

If you delay benefits until 70, you’ll receive about $2,604 a month for 20 years, totaling $624,960. 

At first glance, it would seem that your savviest financial option is to hold tight until you’re pretending to be surprised at your 70th birthday shindig. However, there are some other key factors to consider.

Other Factors To Consider 

Longevity plays a major role. If your health and family history suggest that you could live well into your 80s or 90s, the traditional approach — delaying Social Security to maximize benefits — may be the best strategy, especially if those benefits are going to be a crucial part of your retirement income.

However, if you have other retirement savings or income sources, you might find that claiming your benefits early and investing the money could offer long-term financial advantages. That said, investing comes with risks. You’ll need to carefully manage your portfolio, stay invested for the long term, and remember that market fluctuations are beyond your control. 

Ultimately, the best decision depends on your individual financial situation, investment discipline, and risk tolerance. Though conventional wisdom says to wait as long as possible to take Social Security benefits, a strategic early claim, paired with smart investing, could work to your advantage.

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