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Sorry to Say: You Probably Shouldn't Claim Social Security at 62

By Maurie Backman - Jun 17, 2021 at 5:18AM

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As much as you might want to start taking your retirement benefits as soon as you can, the math may not favor that choice.

There's a reason 62 has long been the most popular age to file for Social Security -- it's the earliest a person can start collecting the retirement benefit.

The size of your monthly Social Security checks will be based on a formula that starts by averaging your inflation-adjusted income from your 35 highest-earning years. Your "full monthly benefit" based on that calculation will be yours to collect if you wait to file until you reach your full retirement age (FRA) -- somewhere between 66 and 67, depending on when you were born. 

But as I just mentioned, a lot of seniors don't wait that long to sign up for Social Security. Instead, they file for benefits the day they're eligible.

Social Security cards sitting on one another

Image source: Getty Images.

That's a route you may be exploring, too. It would allow you to get your money sooner and perhaps kick off an early retirement. But before you rush to claim Social Security at 62, consider the long-term financial consequences.

Can you afford to slash your one guaranteed income stream?

Ideally, you'll enter retirement with a healthy sum of money stashed away in your investment accounts. If you withdraw from that portfolio conservatively enough, it may last through your senior years.

But that's no guarantee. Depending on factors like how well (or poorly) your investments perform, you may land in a scenario where you deplete your nest egg completely. And that could leave you in a world of financial distress.

Social Security, on the other hand, is guaranteed to pay you a monthly benefit for life. And that's why reducing yours by filing at 62 could end up being a bad idea.

For each month before your FRA that you file, your monthly payment is incrementally reduced by a small percentage. But those increments add up. If your FRA is 67 and you file at 62, you'll be cutting 30% off the size of each Social Security payment you receive. So if, for example, you would be entitled to a monthly benefit of $1,500 at 67, filing at 62 will leave you collecting just $1,050 a month.

That $1,050 may be fine as long as you still have investments and assets to tap as well. But even your full retirement benefit is designed to replace only about 40% of your pre-retirement income. If your savings run out, you're likely to find that reduced benefit doesn't come close to cutting it.

Furthermore, you never know how much your expenses might increase as you age. Many seniors wind up spending more on healthcare as they make their way through retirement. And about half will end up needing some type of long-term care at some point in their lives, which can be expensive.

Having a higher monthly benefit could be crucial if your bills start to climb during the latter stages of your retirement -- especially because at that point, working part time to compensate for the gaps in your budget may not be an option.

Make the right call

While it could be tempting to claim Social Security as soon as you're eligible, you'll want to think carefully about whether that's really the right choice for you. If you don't want to wait until your FRA to sign up, you might consider taking the middle ground, perhaps by claiming at 65, the age at which you can sign up for Medicare.

Finally, consider this. As the nonprofit Center on Budget and Policy Priorities notes, Social Security provides at least 50% of the income for about half of U.S. seniors, and for about a quarter of them, it provides at least 90%. In other words, odds are, that payment is going to be seriously important to your financial health in retirement. For that reason alone, you may want to rethink the idea of filing at 62 and locking in a much lower monthly benefit.

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