The earliest Social Security claiming age is also one of the most popular, and it's not difficult to see why. After paying into the program for decades, it's natural to want your money back as quickly as possible. Some recipients also have financial constraints that prohibit claiming later.
You'll get the greatest number of checks possible by signing up right away at 62, but you'll run into some side effects, too. Here are three you need to be aware of if you plan to apply for Social Security immediately upon eligibility.
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1. You'll get smaller checks
The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. It's anywhere from 66 to 67 for today's workers. Claiming before this age shrinks your checks.
You'll lose 5/9 of 1% per month for up to 36 months of early claiming and 5/12 of 1% per month for every month of early claiming beyond 36 months. This amounts to a 25% benefit reduction for those who claim at 62 with an FRA of 66, or a 30% reduction for those with an FRA of 67.
This benefit reduction is permanent, and it could result in a smaller lifetime benefit for you. Those who can afford to delay and expect to live into their mid-80s or beyond typically get more money overall by delaying benefits. Every month you wait increases your checks slightly until you qualify for your maximum benefit at 70. But those with shorter life expectancies are usually better off claiming earlier.
2. You'll get smaller cost-of-living adjustments, too (COLAs)
Social Security cost-of-living adjustments (COLAs) give your benefit checks a boost almost every year to help combat some of the pressures of inflation. They are a percentage of your benefit -- for example, the 2024 COLA is 3.2%.
This results in larger COLAs by dollar amount for those with larger checks. And as we've already discussed, claiming at 62 shrinks your benefit.
Say you have two individuals with FRAs of 67 and both would qualify for a $2,000 monthly benefit at that time. One claims at their FRA and the other claims at 62, which means only getting $1,400 per month. If we add 3.2% to both of those amounts, the individual claiming a $2,000 benefit would get an extra $64 per month in 2024 while the individual claiming a $1,400 benefit would only get about $45 more per month in a COLA.
3. You could run into the earnings test
The Social Security Administration could also withhold the benefits of some 62-year-old claimers if they earn too much during the year. This is called the earnings test. If you'll be under your FRA for all of 2024, you'll lose $1 for every $2 you earn over $22,320. If you'll reach your FRA in 2024, you'll only lose $1 for every $3 you earn over $59,520 if you hit this amount before your birthday.
The government gives this money back to you eventually in the form of a boost to your checks when you reach your FRA. But you still won't walk away with as much as you would have gotten had you delayed benefits until your FRA in the first place.
None of these things are intended to deter you from applying at 62 if that's what you want to do. It can be the best decision for some people. Just make sure you're comfortable with the above consequences so you don't encounter any surprises once you start claiming.
