Choosing when to begin collecting Social Security retirement benefits ranks as one of the most important retirement decisions you'll make. Many Americans take Social Security as early as possible, at age 62.
According to the most recent data from the Social Security Administration, 62 is the second most popular age to begin receiving Social Security retirement benefits. Nearly one in four seniors (22.9% of men and 24.5% of women) claim Social Security at age 62. Should you?
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Why 62 could be great for you
Claiming Social Security retirement benefits at age 62 could be great for you if you fall into one of three groups. It's also possible that you could fit into two of these groups.
The first group consists of people who are financially secure and are eager to retire early. For some of these people, Social Security will merely be a supplemental source of retirement income. They could have great pensions, or significant amounts saved for retirement in IRAs and/or 401(k) accounts.
The second group includes those who don't have quite as much money saved for retirement as they'd like. However, they can retire comfortably by claiming Social Security and continuing to work for a while, perhaps on a part-time basis.
The third group is made up of people who have not-so-positive reasons for claiming Social Security early. Some of these people could have health issues that don't qualify for Social Security disability benefits but are still concerning enough for them to quit working. Others might have lost their jobs and been unable to find work. Receiving Social Security retirement at 62 could provide a financial lifeline.
Whichever group(s) you fall into, your expected longevity is important. If you don't think you'll live past your mid-70s, collecting Social Security retirement benefits early could be the smartest financial decision.
Consider the drawbacks
Keep in mind that regardless of why you claim Social Security at 62, you'll pay a steep penalty for doing so. The Social Security Administration will reduce your benefits by five-ninths of 1% each month before your full retirement age (FRA). If you begin collecting benefits more than 36 months before your FRA, the penalty will be five-twelfths of 1%.
For anyone born in 1960 or later, your FRA is 67. If you receive Social Security retirement benefits at 62, your monthly benefit will be 30% lower than if you'd waited until your FRA.
There's also a financial incentive to delay claiming Social Security until after your FRA. Your benefits will increase by two-thirds of 1% each month you hold off through age 70. Claiming Social Security benefits at 70 would boost your monthly benefit by 30% compared to what it would be at a FRA of 67.
Don't overlook healthcare costs in your financial planning. Many people won't have employer-covered health insurance after they retire. Waiting until age 65 to claim Social Security could be advantageous, since you'd be eligible for Medicare.
If you're considering collecting Social Security at 62 and continuing to work, note that you might not make as much money as expected. The Social Security Administration will deduct $1 from every $2 from your benefits if you make above an annual limit and claim benefits before your FRA. That limit is $22,320 for 2024. During the year you reach your FRA, $1 for every $3 will be deducted from your benefits if you make above a higher earnings limit. In 2024, the limit is $59,520. Once you hit your FRA, though, you'll begin to receive the full amount withheld.
Another important statistic
While nearly one in four seniors claim Social Security at 62, there's another important statistic you need to know. Over 90% of Americans will be better off financially by waiting until 70, according to an analysis published by the National Bureau of Economic Research in 2022.
