The earliest age you can start Social Security is 62 and that's also the most popular time to sign up for benefits. In 2017, approximately 29% of men and 33% of women signed up for benefits at 62, according to the Social Security Administration (SSA).
After years of working hard for every dollar, it seems like a nice treat to suddenly get checks from the government every month. But few people realize how much they're short-changing themselves when they sign up for Social Security as soon as they blow out their 62nd birthday candles. Here are three reasons you may want to hold off.
1. You're reducing your benefits for life.
The amount you get from Social Security depends on how much you earned during your working life and also on the age at which you begin receiving benefits. You can begin taking Social Security as early as 62, but if you want the full benefit you're entitled to, you must wait until your full retirement age (FRA). This is 66 or 67, depending on your birth year.
When you claim early, the SSA reduces the size of your monthly checks to account for the extra time you're receiving benefits. Applying at 62 means you'll receive only 70% of your scheduled benefit per check if your FRA is 67 or 75% if your FRA is 66. This process works the other way, too. You can delay benefits past your FRA and your checks will keep growing until you reach the maximum benefit at 70 -- 124% of your scheduled benefit for an FRA of 67 or 132% for an FRA of 66.
To give you an idea of how much you could lose by starting benefits early, let's consider the average Social Security benefit of $1,470 per month. If you're eligible for this amount at your FRA of 67 and you claim benefits until 90, that's a total of $405,720 in benefits over your lifetime. Starting benefits at 62 would get you only 70% of that $1,470 per month, or $1,029 per month. If you claim benefits until you're 90, you end up with a total of $345,744. That's a difference of nearly $60,000 -- enough to cover a year or two of living expenses for most retirees.
2. The SSA might reduce your benefits if you're still working.
Those who wait until their FRA to claim Social Security can do so without fear of the government reducing their benefits, but this isn't the case for those who begin claiming early. In 2019, for every $2 you make over $17,640, the SSA will take $1 from your Social Security check if you were claiming benefits and under your FRA for the entire year. If you'll reach your FRA in 2019, the SSA takes $1 for every $3 you earn over $46,920 if you exceed this amount before reaching your FRA.
The good news is that those withheld dollars aren't gone forever. When you reach your FRA, the SSA will recalculate your benefit amount to account for the months it reduced or withheld your benefits. So your checks will increase slightly, though they probably won't be as big as if you'd waited until your FRA to begin claiming benefits.
3. Your retirement savings have to last you a long time.
Many people claim Social Security benefits at 62 so they can afford to retire sooner, but a lot of those same people have small nest eggs that won't last them the rest of their lives. A 2017 Government Accountability Office survey found the median retirement savings for adults 55 to 64 was $107,000. Everyone's retirement savings goals are different, but that's nowhere near enough for most people to enjoy a comfortable retirement.
We can never know how long we're going to live, but people are living longer and longer. One in three 65-year-olds can expect to live past 90 today, and one in seven will live past 95, according to the SSA. Social Security was never meant to cover all or even most of a retiree's expenses, but it can help supplement your existing savings. Your benefits won't go as far when you start Social Security at 62, though, so you run a bigger risk of outliving your retirement savings.
Sometimes you have no choice but to start Social Security at 62. You or your spouse may become unable to work, and you may have to start benefits to make ends meet. But if you have a choice, you're better off delaying Social Security until your FRA or even 70. This will make a significant difference in the benefits you receive over your lifetime, and it can help you stretch your personal savings a little further.