Sorry to Say: You Probably Shouldn’t Claim Social Security at 62

Many people, and possibly even most people, can’t wait to retire. A life without work is appealing to people approaching 60 for a wide variety of reasons, but it doesn’t necessarily mean you should file for Social Security benefits as soon as you have the chance.

Here, we’ll focus on why taking Social Security at 62 might be a mistake.

You’ll receive substantially less

During your working career, you’ve paid (or will pay) Social Security taxes on wages up to the maximum taxable wage base, which is $160,200 in 2023. In exchange, you’ll receive a monthly check in retirement commensurate with the level of Social Security tax you’ve paid into the system over the years. Note that this is only true if you wait until at least Full Retirement Age (“FRA”) to retire, which generally falls between age 66 and 67 for today’s prospective retirees.

Taking Social Security before FRA means a lower monthly check, potentially to the tune of 30% less than you would have received if you waited until FRA to initiate your claim. For every month you wait past age 62, you’ll receive an increased benefit; if you choose to delay retirement even further (past FRA), you’ll lock in an additional 8% for every year you delay up to age 70. This is before accounting for annual cost-of-living-adjustments, or COLAs.

Naturally, delaying Social Security to any age is a gamble of sorts. Nobody knows what will happen in the stock market or in your family during the period you plan to wait. But if you are in good health, and do have a bit of savings to bridge the gap, it’s abundantly clear that waiting past age 62 is going to make a lot of sense financially.

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Social Security is a spending floor

Social Security is generally seen as a minimum spending floor in retirement. In other words, Social Security can be used to reliably cover ongoing fixed expenses like rent, food, and major utility costs. The beauty of Social Security is that it’s also inflation-adjusted, meaning you’ll get an annual bump depending on how prices in the economy have risen over the preceding year.

The 2023 COLA is 8.7%, which is the highest benefit adjustment since 1981. Given the broad decline in stock market (and bond market) indices last year, Social Security recipients are certainly glad to see higher checks. This comes at a time when selling stocks or bonds at a loss to cover living expenses is, to put it kindly, less than ideal.

This is all to say that waiting for higher checks is a great way to establish a higher minimum spending floor in retirement, and one that will receive annual inflation adjustments for the rest of your life. Beginning from a higher number will also make these inflation adjustments larger in dollar terms as the years churn forward.

If it’s at all possible, make an effort to collect every dime to which you’re entitled by waiting the appropriate amount of time after age 62 to lock in your full benefit amount.

A complex decision

The decision to claim Social Security shouldn’t be taken lightly, and should be reviewed in conjunction with your family, as well as with a qualified financial planner if necessary. In the end, we can only make decisions with the information we have on hand — in tandem with reasonable predictions about the future.

If you have the savings, the health, and a bit of patience, it can make a lot of sense to wait long past age 62 to file your Social Security claim. Your future self won’t regret it.

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