This decision will affect your checks for the rest of your life.
You can’t claim Social Security retirement benefits before age 62, and for many, that already feels like a pretty long wait. For those struggling financially and those hoping to exit the workforce as quickly as possible, signing up for Social Security right away can feel like the best move. But it could have some unintended consequences. Here’s what you need to know before you submit your application.
What happens when you claim Social Security at 62?
Not everyone realizes this, but taking Social Security at 62 is considered claiming early. And when you claim early, the government shrinks the size of your monthly checks. You could lose up to 30% of your monthly benefit by signing up right away at 62, and that could add up to tens of thousands of dollars less over your lifetime.
You must wait until your full retirement age (FRA) to apply if you want to avoid the benefit reduction due to early claiming. This depends on your birth year, but it’s somewhere between 66 and 67 for today’s workers.
If you claim right at this age, you’ll receive the full benefit you’ve earned based on your work history. But you can also continue delaying benefits, and your checks will increase until you qualify for your largest possible checks at age 70. This could be as much as 124% to 132% of your full benefit per check, depending on your FRA.
But delaying benefits isn’t always a good choice either. If you die before you sign up, you may not get any benefits at all. And even if you do live long enough to claim your largest possible checks, there’s no guarantee it’ll lead to a larger lifetime benefit. That depends on your life expectancy. Plus, when you delay Social Security, you’re increasing the number of years of living expenses you must cover on your own.
Is applying for Social Security at 62 right for you?
There are two major factors you have to consider when deciding whether to apply for Social Security at 62. The first is your life expectancy. Those with shorter life expectancies are typically better off claiming early, so they can get as much out of the program as possible while they’re still alive.
However, this may not be the best move for those who expect to live into their mid-80s or beyond. Often, these people wind up with larger lifetime benefits if they delay Social Security until their FRA or later. But this is sometimes easier said than done.
The other factor you have to consider is your finances. Delaying Social Security doesn’t make sense if doing so would cause you to take on debt or otherwise put your financial security in jeopardy. In that case, signing up early is probably a better move, even if it means settling for a smaller lifetime benefit.
If you’re still unsure whether claiming at 62 is your best option, creating a my Social Security account can help. There’s a calculator here that can show you what kind of a Social Security benefit you’ll qualify for at various starting ages based on your work history to date. Choose a few ages you’re considering and note their monthly benefits. Then, multiply these by 12 to get your estimated annual benefits. And then multiply each of those by the number of years you expect to claim.
For example, if you expect a $1,500 benefit at 62, that would give you an $18,000 annual benefit. If you claimed that for 20 years, you’d have a lifetime benefit of $360,000.
Doing this should give you an idea of which starting age will give you the most money overall. You can use this to choose a claiming age for now. But know that you may have to adjust this over time. Your financial situation or your plans for retirement might change over time. The government could also alter Social Security, which could affect when you want to sign up.
Check in with yourself at least annually to make sure you’re still comfortable with your Social Security plans and make changes if not. Don’t forget to adjust your personal retirement contributions as well if you decide to claim Social Security at a different time.
