How Much Will Retiring at 62 Instead of 65 Reduce Your Social Security Benefits?
Many Americans dream about retiring early and claiming Social Security benefits as soon as possible. While you can start your Social Security retirement income as early as age 62, doing so will reduce the size of your monthly checks. But just how much money will you lose if you retire at 62 rather than waiting until full retirement age (FRA) at 65 or later?
In this article, we’ll break down the benefit reductions you can expect by claiming Social Security early at age 62. We’ll also look at how this adds up over the long run. Understanding these impacts can help you decide the best age to begin taking your Social Security income.
Social Security Benefit Eligibility Ages
Before we look at the dollar impacts, it helps to understand when you can start collecting your Social Security retirement benefits:
- Age 62 – Earliest age to claim reduced benefits
- Age 65 – When retirement benefits were first available; now being phased out as full retirement age rises
- Age 67 – Current full retirement age for anyone born in 1960 or later
- Age 70 – Maximum benefit age when delayed retirement credits stop
While 65 was traditionally seen as full retirement age, two amendments in 1983 pushed the full retirement age to 66 for those born in 1943-1954 and then to 67 for anyone born in 1960 or later.
But 62 remains the earliest age when you can claim benefits if you qualify based on your prior work history contributing to Social Security taxes. Let’s look closer at how claiming at 62 instead of 65 reduces your benefit amount.
Social Security Reduction at Age 62
Claiming Social Security at age 62 results in a permanent reduction in your monthly retirement benefit relative to waiting until full retirement age:
- If your full retirement age is 66, claiming at 62 reduces benefits by 25%
- If your full retirement age is 67, claiming at 62 reduces benefits by 30%
This reduction is known as an “early retirement reduction factor” and accounts for the fact that you will receive benefits earlier and for a longer period of time.
Say your full monthly benefit at age 67 would be $1,500. Here is how much you would receive if you claim at age 62 instead:
- Age 62 benefit: $1,500 x 70% = $1,050
- Reduction: $1,500 – $1,050 = $450
- Percentage reduction: $450/$1,500 = 30%
As you can see in this example in 2023, claiming Social Security at 62 instead of your FRA at 67 cuts your monthly benefit by 30%, permanently reducing your checks by about $450 per month.
Claiming at 62 vs. 65
What if your full retirement age is 66 but you are choosing between claiming at age 62 and age 65?
In this case, your monthly benefit would be reduced by 25% rather than 30%:
- Age 62 benefit: $1,500 x 75% = $1,125
- Reduction: $1,500 – $1,125 = $375
- Percentage reduction: $375/$1,500 = 25%
The reduction is smaller when your full retirement age is 66 vs. 67. But you still give up a significant portion of your earned Social Security benefits by applying before reaching full retirement age.
Impact on Lifetime Benefits
The reduction percentages above apply to your monthly income. But how do these early filing reductions translate to lifetime Social Security benefits?
The average life expectancy at age 65 in the U.S. is 19.5 years. If your full retirement benefit was $1,500 at age 66, here is how much cumulative Social Security income you would receive if you claim starting at ages 62, 65 or 70:
- Claim at 62: $1,125 x 228 months = $256,500
- Claim at 65: $1,500 x 234 months = $351,000
- Claim at 70: $1,980 x 192 months = $380,160
In this example, claiming at age 62 instead of 65 results in over $94,000 less in total lifetime Social Security benefits. Waiting until age 70 to claim nets you an additional $29,000+ compared to waiting until your FRA at 65.
The longer you expect to live, the greater the overall reduction by claiming Social Security early. But if you retire at 62 because of health issues, claiming benefits right away may still be the best choice.
Impact on Survivor Benefits
One other important consideration if you claim Social Security early at 62 is that your survivor benefits for an eligible spouse will be lower when you pass away.
Your spouse can be entitled to the greater of their own benefit or up to your full benefit. By claiming early, you limit their potential survivor benefit.
For example, if you wait to claim at 67, your surviving spouse can inherit your full $1,500 monthly benefit. But if you claim at 62 and reduce your check to $1,050, their maximum survivor benefit would be reduced as well.
Make sure to factor in impacts on a spouse when deciding the optimal age to file for Social Security benefits. Your claiming age affects both your own retirement income and potential benefits left to family members.
When It Makes Sense to Claim at 62
Despite reducing your monthly income and lifetime benefits, there are some cases where it makes financial sense to claim Social Security as soon as possible at age 62:
- You urgently need the income and have no other option.
- You have reason to expect a shorter-than-average lifespan.
- You expect to earn more income later and could be subject to Social Security benefit taxes.
- You want to use Social Security to supplement retirement savings you withdraw while markets are down.
- You retired early at 62 and need the Social Security income right away.
- You expect Social Security to be modified and want to claim under current rules.
Just make sure to understand the financial tradeoffs so you can maximize combined retirement income sources. Your decision depends on your complete financial situation.
Strategies to Increase Benefits
Some strategies you can use to increase your total Social Security income despite filing at 62 include:
- Minimize early withdrawals from retirement accounts to enable growth.
- Claim a spousal benefit if your spouse is delaying.
- Switch to your higher spousal benefit later.
- Use retirement funds first to delay claiming your own benefit.
- Plan to return to work part-time to reduce the years of early claiming.
With proper planning, you may be able to partially offset the reduction from retiring and claiming Social Security at age 62 instead of later ages.
When You Should Delay Claiming
In many cases, it makes sense to wait beyond age 62 if possible to maximize your monthly Social Security benefit. Reasons to consider delaying include:
- You don’t urgently need the benefits.
- You have average or above-average life expectancy.
- You don’t have other retirement income sources.
- You can continue working to maintain income.
- You want to maximize survivor benefits for a spouse.
- You expect Social Security to provide a large portion of retirement income.
Every situation is unique. Use Social Security calculators and consult a financial advisor to help decide the ideal age to claim based on your overall retirement plan.
The Bottom Line
Claiming Social Security benefits at age 62 instead of waiting until your full retirement age results in a 25-30% permanent reduction in monthly income. This can amount to over $90,000 less in lifetime benefits for the average retiree.
While early retirement at 62 may be the best choice in some cases, understand the financial impacts across your total retirement outlook. Consider your life expectancy, income needs, survivor benefits and other factors before deciding when to claim Social Security.
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How much will you lose by claiming Social Security at age 62 instead of 65 or later?
Claiming Social Security at age 62 instead of waiting until the full retirement age can result in a reduction in monthly benefits. The amount you may lose depends on your specific circumstances, including your lifetime earnings and the year you were born. It is important to consider the long-term impact on your retirement income before making a decision to claim early.
What is the full retirement age?
The full retirement age is the age at which you are eligible to receive your full Social Security retirement benefits. It is determined by your year of birth and is currently 66 for those born between 1943 and 1954. The full retirement age gradually increases to 67 for individuals born in 1960 or later.
Can I retire at 62?
Yes, you have the option to retire at 62 and begin receiving Social Security benefits. However, keep in mind that your monthly benefit amount will be reduced compared to what you would receive if you wait until your full retirement age. The reduction in monthly benefits varies based on your birth year.
How does claiming Social Security at 62 affect my monthly benefits?
Claiming Social Security at 62 instead of waiting until your full retirement age can result in a reduction in monthly benefits. The reduction is permanent and typically ranges from 20% to 30% depending on your birth year. It is important to consider this reduction in benefits when planning for your retirement income.
What is the Social Security Administration’s stance on early retirement?
The Social Security Administration provides the option to claim Social Security benefits as early as age 62. However, they encourage individuals to carefully consider the long-term impact of claiming benefits early, as it can result in a reduction in monthly benefits for the rest of your life.
Can I file early and still collect Social Security?
Yes, you can file early and start collecting Social Security benefits as early as age 62. However, it is important to keep in mind that your monthly benefit amount will be reduced compared to what you would receive if you wait until your full retirement age.
How does claiming Social Security at 62 reduce my benefits?
Claiming Social Security at 62 reduces your benefits by a percentage based on your birth year. The reduction is a permanent adjustment to your benefits and can result in a lower monthly benefit amount compared to what you would receive if you wait until your full retirement age.
What are the benefits of waiting to claim Social Security?
Waiting to claim Social Security benefits until your full retirement age or later can result in a higher monthly benefit amount. The longer you delay claiming, up to age 70, the higher your monthly benefit will be. This can help you increase your retirement income and provide additional financial security in your later years.
Is it a good idea to take Social Security benefits at 62?
Whether it is a good idea to take Social Security benefits at 62 depends on your individual circumstances and financial goals. While claiming benefits early at 62 may provide income sooner, it also results in a permanent reduction in the monthly benefit amount. It is recommended to consult with a financial advisor or consider your retirement plan before making a decision.
If I start receiving Social Security at 62, does that mean I will receive benefits for a longer period?
Starting to receive Social Security benefits at 62 may allow you to receive benefits for a longer period compared to waiting until your full retirement age or later. However, it is important to consider the reduction in monthly benefits when determining the overall impact on your retirement income.