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3 Reasons It's Dumb to Take Social Security Benefits at 62

By Maurie Backman – Apr 4, 2020 at 9:04AM

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Eager as you may be to claim your benefits, doing so could backfire for these reasons.

You can sign up to start collecting Social Security as early as age 62, and many seniors are eager to go that route. In fact, 62 is the most popular age to start taking benefits. The upside, of course, is getting your money as early in life as possible. While you can snag that cash sooner, here are three major drawbacks to filing for Social Security as soon as you're able to.

1. You'll risk shrinking your monthly benefit for life

Your Social Security benefits are calculated based on your earnings during your 35 highest-paid years in the workforce. From there, you're entitled to your full monthly benefit once you reach full retirement age, or FRA. That age is a function of your year of birth, but it's either 66, 67, or somewhere in between.

Older man typing on computer keyboard

IMAGE SOURCE: GETTY IMAGES.

For each month you claim benefits ahead of FRA, they shrink by a modest percentage, which means if your FRA is 67 and you file at 66 1/2, you won't take such a large hit. But if you claim your benefits at 62 when your FRA is 67, you'll be looking at a 30% reduction -- most likely for life.

Why "most likely?" Well, you do get the option to undo your filing once in your lifetime, so if you were to claim benefits at 62, change your mind, withdraw your application, and repay the money you received within a year, you'd get a chance to file again at a later age, thereby potentially avoiding a lifelong reduction.

But many seniors who claim their benefits early don't save that money and therefore aren't in a position to repay it, which is why filing at 62 often means lowering your benefits on a permanent basis.

2. You'll leave a surviving spouse with less income

If you're married and have a spouse who's likely to outlive you, filing for benefits at 62 is a good way to slash his or her income for life. Once you pass, your spouse will be entitled to survivors benefits that equal 100% of your monthly benefit once he or she reaches FRA, so claiming your benefits as early as possible is a bad idea if your goal is to leave your spouse in a financially comfortable state.

3. You may have some benefits withheld if you're still holding down a job

You're allowed to work and collect Social Security at the same time. If you do so once you hit FRA, your benefits won't be impacted. But if you do so before FRA, you'll risk having some benefits withheld if your income exceeds a threshold known as the earnings test limit.

In 2020, you can earn up to $18,240 without having your benefits impacted. Beyond that point, you'll have $1 in Social Security withheld for each $2 you earn. If you'll be reaching FRA in 2020, that limit increases to $48,600, but beyond that, you'll have $1 in Social Security withheld for every $3 you earn.

The amount you have withheld will be added back into your benefits once you reach FRA, so that money is not forfeited permanently. But remember, the mere act of claiming benefits before FRA results in an automatic reduction that generally is permanent, so if you're still working and therefore aren't able to enjoy those benefits in full anyway, it makes little sense to file at 62.

When you're entitled to money, it's hard to sit back and wait to collect it. But in many cases, claiming Social Security at 62 is a silly move that could backfire, so be sure to consider the pitfalls of filing for benefits as early as you possibly can.

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