Key Points
There’s a reason 62 has long been a popular age to file for Social Security. It’s the earliest age you’re allowed to take benefits.
But just because you can claim Social Security at 62 doesn’t mean you should. If you file at the earliest age possible, your benefits may be reduced more than you’d expect.
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What reduction will you face if you claim Social Security at 62?
The amount of money an early Social Security claim costs you depends on your full retirement age. For people born in 1960 or later, full retirement age is 67.
Meanwhile, your Social Security benefits are reduced by about 6.67% a year for the first three years you file ahead of full retirement age, and then by about 5% a year after that.
So let’s say you file for Social Security three years ahead of full retirement age. In that case, your benefits get reduced by about 20%. But if you file at 62, your benefits will be reduced by 30%.
Of course, the actual impact on your benefits depends on the sum you’re entitled to each month.
If you’re eligible for $2,000 a month in Social Security at full retirement age, filing at age 62 will shrink your monthly checks to $1,400. If you’re eligible for $2,500 a month at full retirement age, claiming at 62 will leave you with $1,750.
The more money you’re entitled to at full retirement age, the more an early claim will cost you on a dollar-for-dollar basis.
Make sure you can afford to slash your benefits
You may like the idea of claiming Social Security as soon as you’re allowed to. And in some cases, that strategy could make sense.
If you have a lot of health problems, for example, and fear you won’t live a very long life, it could pay to claim Social Security at 62 to start getting those checks right away. If you pass away fairly young, that early claim could lead to more lifetime income from Social Security.
Before you make that decision, though, calculate your monthly spending needs. And make sure you can afford to reduce your monthly benefits by 30% compared to full retirement age.
If you have a lot of retirement savings to tap, that reduction may not be as painful. But if you expect Social Security to serve as your primary source of retirement income, you could end up setting yourself up for a years-long struggle by filing for benefits at 62.
If you’re itching to retire and recognize that you can’t stop working without Social Security, you may want to land on a compromise. Filing for benefits at 64, for example, will result in a smaller reduction than claiming at 62. It pays to play around with different filing scenarios before locking in a decision.
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