There are millions of older Americans today who rely on Social Security for monthly income. And without that money, keeping up with bills would be a struggle.
There are a couple of factors that go into calculating your monthly Social Security benefit -- namely, your earnings history and your filing age. Full retirement age is when you can collect your monthly Social Security benefits in retirement without a reduction, and that age is 67 for people born in 1960 or later.
Image source: Getty Images.
But you actually get a range of choices when it comes to claiming Social Security. And the earliest age to file for benefits is 62.
Not surprisingly, this tends to be a popular age to sign up, but it comes with a huge drawback -- reduced monthly benefits for life. With a full retirement age of 67, claiming Social Security at 62 means slashing your benefits by about 30%, which is a pretty significant hit.
If that's the case, then why do so many people end up claiming Social Security at 62? Here are a few explanations.
1. They have a hard time saying no to money that's available to them
If someone were to offer you $20 on the spot or the promise of $30 a week later, would you take the $20 and run? Quite possibly. The same psychology explains why so many people claim Social Security at 62.
When there's money being dangled in front of you, it's hard to pass it up. And it's also difficult to say no to money when you're concerned it may not be there in the future.
It's not a secret that Social Security is facing some serious financial challenges. The program is not in danger of going away completely, but benefit cuts are a possibility. You may decide to sign up for Social Security as early as possible so you can start getting your benefits while the money is still available.
2. They're no longer working and need a way to pay the bills
A 2024 MassMutual survey found that current retirees left the workforce at an average age of 62. Another big reason so many people sign up for Social Security at the earliest possible age is that they've left their jobs and need the money to cover their living costs.
The Federal Reserve puts median retirement savings among Americans ages 65 to 74 at just $200,000 as of 2022, the last year for which data is available. And while this number may be a bit dated, it speaks volumes. If you've left your job without the cushion of a giant nest egg, you may have no choice but to sign up for Social Security right away, even if you'd prefer to lock in larger monthly payments.
3. They don't want to gamble on their life expectancies
Filing for Social Security at 62 means reducing your monthly benefits, but not necessarily your lifetime Social Security payout. If you don't end up living a very long life, an early claim can make sense financially.
Another explanation as to why people tend to claim Social Security at 62 is that they don't want to run the risk of shorting themselves on lifetime income. No one can predict their own lifespan. And starting off retirement with great health also doesn't guarantee a long life. You may find that claiming Social Security at 62 gives you the most peace of mind, even if you're shrinking your benefits on a monthly basis in the process.
It's OK to claim Social Security at 62 -- just have a reason
There tends to be a negative connotation in the context of claiming Social Security at 62, since it means reducing a major income source for life. But it's important to recognize that taking benefits early isn't automatically a poor choice.
On the other hand, signing up for Social Security at 62 without having a good reason is a bad idea. That reason could be needing the money, concerns about your life expectancy, or something else. The key is to think things through and have an actual filing strategy, as opposed to rushing into Social Security at 62 simply because you can.
