One of the biggest factors to impact your Social Security benefit amount is the age at which you begin claiming. Age 62 is the earliest when you can file, and it's also the most popular time to start taking benefits. In fact, around 35% of men and close to 40% of women file at age 62, according to a 2020 survey from the Bipartisan Policy Center.
While there are good reasons to consider claiming early, there are also certain situations where you might regret it -- particularly if your savings are falling short.
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How claiming at 62 affects your benefits
The earlier you file for Social Security, the smaller your monthly payments will be. If you have a full retirement age (FRA) of 67 (meaning you were born in 1960 or later), your benefits will be reduced by 30% if you file at 62.
These reductions are permanent, too. One common misconception is that you'll only receive reduced payments until your FRA, at which point you'll collect your full benefit amount. In reality, if you file early, you'll receive smaller checks for the rest of your life.
While 30% may not seem like much, it can take a toll on your monthly income. Say, for instance, you have an FRA of 67, and by claiming at that age, you'd collect $1,800 per month.
If you were to file at age 62, your benefits would be reduced to $1,260 per month. That's a reduction of $540 per month, or $6,480 per year. If your savings are falling short, those smaller payments can make it even harder to enjoy retirement comfortably.
Is claiming early still worth it?
One thing to remember when deciding when to claim is that, in theory, the amount you receive over a lifetime should be roughly equal, regardless of the age at which you file. By claiming early, you'll receive smaller monthly payments, but more of them in total. Delay benefits, and you'll earn larger checks, but fewer of them over a lifetime.
That said, these calculations assume you'll have an average life span. If you live well into your 80s or beyond, you could earn substantially more in total by delaying benefits. But if you have reason to believe you may have a shorter-than-average life span, you might come out ahead by filing early.
Of course, no one can accurately predict exactly how long they'll live, and this isn't the most pleasant topic to think about. But by taking an honest look at your health and lifestyle, as well as your family history, it can be easier to determine when to claim.
Steps to take right now
Whether you're closing in on retirement or still have years to go, there are a couple of things you can do now to prepare for Social Security.
- Check your benefit amount: You can see an estimate of your future benefit amount, based on your real earnings, through your mySocialSecurity account online. This is the amount you'll collect at your FRA, and from there, you can estimate what your benefits would look like if you file early.
- Double-check your retirement number: When you know approximately how much you need to save for retirement, it will be easier to gauge how much you'll need to rely on Social Security. If your benefits will make up a significant portion of your income, claiming early could be risky.
- Consider a strategy with your partner: If your partner is also entitled to Social Security, it may be wise to have a plan for when each of you will file. You may choose to claim at the same time, regardless of your ages, or perhaps one of you will file early while the other delays.
There's no one-size-fits-all answer as to when you should take Social Security. Claiming early can be a smart move in some cases, but it's not right for everyone. By weighing the pros and cons of all your options, it will be easier to decide when you should take benefits.
