When you turn 62, you become eligible to get Social Security retirement benefits. Although a guaranteed monthly check in the mail may sound great, you should likely pass up the opportunity to claim your benefits ASAP and wait for a few more years.
This may come as a disappointment if you were planning to claim Social Security at 62. But there are a few key reasons why you may want to rethink your choice if filing for checks soon is on your radar.
1. Claiming at 62 can permanently shrink your benefit
Every retiree is entitled to a standard benefit based on how much they earned over their 35 highest-earning years. But this standard benefit is only available at full retirement age (FRA). FRA is based on birth year. If you were born in 1956 or later, it's between 66 and four months and 67.
Obviously, 62 is well before full retirement age. So you need to realize starting benefits is considered early filing -- and that has consequences. Benefits shrink for every month you file ahead of FRA, with the reduction equaling 5/9 of 1% per month for the first 36 months and 5/12 of 1% per month if you start benefits before then.
This adds up to a 6.7% reduction in each of the first three years you've claimed benefits ahead of FRA and another 5% cut for each prior year.
If you start checks at 62 with an FRA of 67, the reduction in your benefit is a whopping 30%. This cut to your benefits is permanent and lasts for the rest of your retirement. You'll always face smaller checks than you'd have had if you'd delayed your claim for longer -- and you could seriously regret this later on.
2. You could also adversely affect your spouse
If you were the higher-earning spouse, your partner could be hurt financially by your decision to start checks at 62. That's because when one partner dies, the other gets to keep the higher of the two Social Security checks coming into the house.
If you delayed filing your benefits claim, you'd raise your check amount for each year you waited beyond 62. That means a bigger survivors benefit. But by claiming as soon as you became eligible and accepting a smaller check, you'll be dooming your partner to a reduced survivor benefit as well.
It can be hard for widows and widowers to make ends meet when the number of Social Security checks goes from two to one after a death. You don't want to make things even worse by leaving your partner with a reduced benefit.
3. You could face restrictions on working without losing benefits
Finally, if you were hoping to double-dip and get a paycheck and Social Security, claiming benefits at 62 is going to complicate that.
The problem is, if you work before your full retirement age, you end up reducing your Social Security benefit if you earn above a certain threshold. Eventually, payments are recalculated if your benefits are forfeited due to earning too much -- but this doesn't happen until FRA.
If you don't want to have to worry about limiting your paychecks for several years until reaching FRA to avoid losing Social Security income, then you shouldn't start your checks until well after your 62nd birthday.
For all of these reasons, putting off a claim for Social Security is often the smartest move. The more time you can wait after age 62, the bigger your future benefit (and your spouse's future survivor benefits) will become.