Social Security has been an important part of American life since it was introduced in the 1930s.
There are various Social Security programs, but retirement is particularly relevant to every taxpaying American. For some people, Social Security retirement benefits are their only source of retirement income. This makes it vital to know as many of the ins and outs as possible.
One of the most important Social Security decisions you can make is when you claim benefits. There are valid arguments for taking Social Security at various ages, but there's one particularly good reason claiming benefits at age 62 could be the way to go for you.
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How benefits are affected by when you claim
Your Social Security benefits depend on your full retirement age, which is when you're eligible to receive your full monthly benefit. It's based on your birth year, as follows:
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Your full retirement age is the baseline for your benefits, but you can choose to claim benefits as early as age 62 or delay them until you reach 70.
Claiming benefits early will reduce them based on how many months away you are from your full retirement age. Within 36 months, they'll be reduced by five-ninths of 1% each month. Every month after 36 will reduce benefits by five-twelfths of 1%.
It works out so someone whose full retirement age is 67 will have their benefits reduced by 30% if they claim at 62.
Delaying your benefits past your full retirement age will have the opposite effect, increasing by two-thirds of 1% each month (8% annually) until you reach 70.
Much of the decision comes down to this one important number
Along with your full retirement age, your break-even point is among the most important numbers you can know in Social Security. It's the age where your total amount received from claiming early equals the total amount received by delaying benefits.
As an example, let's assume someone's full retirement age is 67, and their baseline monthly benefit is $1,800 (close to the average retirement benefit in August 2023). Here's how much they would receive in total by certain ages:
| Claiming Age | Monthly Benefit | Received by 75 | Received by 80 | Received by 82.5 |
|---|---|---|---|---|
| 62 | $1,260 | $196,560 | $272,160 | $209,960 |
| 67 | $1,800 | $172,800 | $280,800 | $334,800 |
| 70 | $2,232 | $133,920 | $267,840 | $334,800 |
Calculations by author.
In this example, someone claiming benefits at age 67 or 70 will receive noticeably less overall by 75 than someone who began claiming at 62. This changes a bit around age 79, with someone claiming at 67 receiving more overall, but it's still less for someone claiming at 70 than for someone claiming at 62.
You shouldn't overlook the many months of missed payments
You may receive more overall at age 79 by waiting until your full retirement age to claim benefits, but it's important to keep in mind the 60 months' worth of missed payments between 62 and 67. The monthly amount will be lower if you claim early, but that money can go toward living expenses, healthcare, investments, or whatever brings you retirement fulfillment.
If Social Security will be your only retirement income source and the reduced benefits won't be enough to cover expenses, then delay them as much as you can to ensure your livelihood isn't jeopardized. Not everybody has the luxury of treating Social Security as purely supplemental income, and that's perfectly fine.
If that isn't the case, claiming benefits on the early end can secure a monthly income and provide you with financial flexibility.
It ultimately comes down to your personal situation
At the end of the day, the decision of when to claim Social Security benefits is not one size fits all. It should be influenced by your personal circumstances, financial needs, and retirement goals. Claiming benefits at 62 offers the advantage of immediate financial support, but if you don't need it, the chance for higher payments later on may make sense for you.
Ultimately, it's all about making an informed decision that aligns with your financial situation and retirement aspirations.
