There’s a reason age 62 is such a popular age to sign up for Social Security — it’s the earliest age you can claim benefits. But filing for benefits at 62 has its consequences, and it’s important to recognize what those entail before making that move.
How much will your benefits shrink?
There’s really just one problem with claiming Social Security at 62 — shrinking your monthly benefit for life. You’re entitled to your full monthly benefit, based on your wage history, once you reach full retirement age, or FRA.
FRA hinges on your year of birth. For those born between 1943 and 1954, it’s 66. For those born in 1960 or later, it’s 67. And for those born between 1955 and 1959, it’s 66 and anywhere from two to 10 months.
For each month you claim Social Security prior to FRA, your monthly benefit gets reduced. And so the reduction you’ll face by filing at age 62 will hinge on your FRA.
If your FRA is 66 and you file at age 62, your benefits will take a 25% hit. If your FRA is 67 and you file at 62, you’re looking at a 30% hit. And if your FRA is somewhere in between, then your reduction will be somewhere between 25% and 30%.
So, let’s say you have a FRA of 67 and you’re entitled to a full monthly benefit of $1,800 at that point. If you claim Social Security at age 62, you’ll reduce your benefit to $1,260 a month. On a yearly basis, that means collecting almost $6,500 less in income. And that’s a hit you may not be able to afford.
Should you sign up for Social Security at 62?
There are specific scenarios where claiming Social Security at 62 could make sense. If your health is poor, for example, and you don’t expect to live a very long life, you could end up with a higher lifetime Social Security benefit if you sign up as early as possible.
Meanwhile, if you’ve saved very well for retirement, to the point where you have a multi-million-dollar nest egg, then a hit to your Social Security benefits may not hurt you. And if filing for benefits at 62 allows you to retire earlier and travel or meet other life goals, then it’s worth doing.
But if you’re low on savings, then claiming Social Security at 62 is a move you might regret. The same holds true if your health is outstanding and you’re likely to live well into your 80s, 90s, or even beyond.
Ultimately, the filing age you choose should hinge on your personal needs and circumstances. But if you’re thinking of claiming Social Security at 62, make absolutely sure you understand what that means as far as your monthly benefit goes.
Some people rush to sign up for Social Security at 62 without fully understanding how much of a financial hit will ensue. And you don’t want to land in that boat and regret your filing decision throughout your retirement.
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