American workers who are eligible for benefits can claim Social Security as early as age 62, although full retirement age isn't until at least 66. The most common age at which people file for their Social Security retirement benefit -- you guessed it -- 62. It's easy to see why many people want that money as soon as possible, but for some retirees, it pays to wait.
Here's what you need to know about claiming Social Security early, and whether or not it could be the right move for you.
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Most people claim early
More than half of all Americans claim Social Security before their full retirement age, according to a report by the Center for Retirement Research at Boston College, and the most popular age to start collecting Social Security is 62. Surprisingly, less than 10% of people wait until after their full retirement age to claim, despite the obvious perk of higher benefit checks for the rest of their lives.
If you're planning to join the roughly 45% of Americans who claim their retirement benefit as soon as possible, then you should know how it will affect your benefits.
The effect of early Social Security
First, it's important to mention that claiming Social Security at 62 won't necessarily have an effect on your lifetime Social Security benefits -- at least in theory. The system is set up so that whether you claim at 62, wait until 70, or take your benefit anywhere in between, the average person will end up receiving the same total amount of money.
However, being comfortable in retirement is all about creating enough income to support the quality of life you want. In this respect, claiming early will have a big effect. Specifically, depending on how early you claim, your monthly benefit will be reduced by the following percentages:
- 6-2/3% for every year before full retirement age, or 5/9% per month, for up to 36 months before full (normal) retirement age.
- 5% per year, or 5/12% per month, beyond 36 months early.
What this means is that if your full retirement age is 66, meaning you were born in 1954 or earlier, then your Social Security benefit will be permanently reduced by 25% if you claim at age 62. If your full retirement age is 67 (born in 1960 or later), the reduction for claiming at 62 is 30%. If you were born between 1954 and 1960, this chart shows your permanent benefit reduction for claiming Social Security at 62.
|
Birth Year |
Full Retirement Age |
Reduction at Age 62 |
|---|---|---|
|
1954 or earlier |
66 years |
25% |
|
1955 |
66 years, 2 months |
25.8% |
|
1956 |
66 years, 4 months |
26.7% |
|
1957 |
66 years, 6 months |
27.5% |
|
1958 |
66 years, 8 months |
28.3% |
|
1959 |
66 years, 10 months |
29.2% |
|
1960 or later |
67 years |
30% |
Data Source: Social Security Administration.
You might want to claim early if...
I already mentioned that you will (theoretically) get the same amount of total Social Security money no matter when you claim, so this can be a good reason to start collecting your benefit as soon as possible. Of course, this is based on average life expectancies. If you're in poor health, or have a family history of heart disease or other illnesses, then it may be smart to claim as soon as possible.
Also, if you had children (or adopted) later in life, they can collect money from Social Security if you claim. Specifically, once you claim your retirement benefit, your child may be able to collect up to 50% of your benefit if they are under age 18 and not married, between 18 and 19 and a full-time student, or 18 or older and disabled. Furthermore, your spouse may also be eligible to collect a benefit, regardless of their age, if they are caring for an eligible child. There is a maximum that can be paid out, but in a family situation like this, you and your family could potentially collect 150%-180% of your benefit, making it smart to claim early.
Another potential reason you may want to claim early is if your spouse is older than you, and he or she expects to receive a spousal benefit based on your work record. Unlike your own retirement benefits, which rise if you delay retirement, there is no benefit to delaying a spousal benefit later than full retirement age. In other words, it may be financially beneficial to claim Social Security at your spouse's full retirement age if they're older than you.
Finally, and most obviously, you should consider claiming Social Security early if you need the money. If you lose your job and don't have enough saved in retirement accounts to live on, then claiming Social Security at 62 can be the best move.
The bottom line
There are some good reasons to take Social Security at 62, but it isn't the best move for everyone. Also consider some reasons to claim at full retirement age, as well as reasons to wait until 70 so you know the pros and cons of each situation. As with most other personal-finance topics, the more you understand about Social Security, the better equipped you'll be to make smart decisions.
