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Claiming Social Security at 62? You May Need to Rethink That

By Maurie Backman – Sep 14, 2021 at 5:09AM

Key Points

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Filing for benefits as early as possible doesn't always make sense.

One of the best things about Social Security is that you're not forced to claim your benefits at a single specific age. Rather, you get a window to sign up for benefits that begins at age 62 and is technically open-ended, though financially speaking, there's no incentive not to file by the time you turn 70.

Because 62 is the earliest age you're allowed to claim Social Security, many seniors opt to go that route to get their money as soon as possible. But if that's your plan, you may want to reconsider.

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The danger of claiming benefits too early

While you're allowed to begin collecting benefits at 62, doing so will leave you with a lower monthly payday for the rest of your life. You're not entitled to your full monthly benefit based on your earnings history until you reach full retirement age (FRA). This is what FRA looks like, depending on your year of birth:

Year of Birth

Full Retirement Age

1943-1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 or later

67

Data source: Social Security Administration.

If you file for Social Security at age 62, you'll slash your monthly benefit by up 30% (the exact reduction depends on your specific FRA). And that's a financial hit you may not be in a position to take.

The reason? The median retirement savings balance among all workers currently sits at $93,000, according to the 21st Annual Transamerica Retirement Survey. Meanwhile, financial experts often recommend withdrawing about 4% of your savings balance each year during retirement to ensure that your money doesn't run out on you too quickly.

If you follow that rule, a $93,000 saving balance will translate to $3,720 in annual income, or $310 in monthly income. Meanwhile, the average senior on Social Security today collects $1,557 a month in benefits.

If you're in line for a similar benefit but you slash it by 30% by signing up at age 62, you'll be left with a monthly benefit of $1,090 instead. Even if you add in another $310 from savings, that's still just $1,400 a month to live on, which probably won't do a very good job of covering all of your bills.

And that's why filing for Social Security at 62 is not a good idea. Many people can't afford to slash their monthly benefit, and if you're one of them, you'd be wise to hold off on signing up until FRA or beyond.

Now, that said, if you're entering retirement with a lot more than $93,000 in savings, then you may be in a better position to claim Social Security at 62. Say you have a $1.5 million nest egg. At a 4% withdrawal rate each year, you're looking at $5,000 a month in income from savings alone. If claiming benefits at 62 allows you to retire early, it's a move worth making, as you may still have plenty of income to live on.

But unless your nest egg is really robust, you should generally plan not to claim Social Security at 62 unless you're forced to because of job loss, health issues, or other circumstances outside your control. It's a great thing that Social Security doesn't force seniors to wait until FRA to sign up for benefits, but filing early is a move that could hurt you throughout your retirement.

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