Sorry to Say: Claiming Social Security at 62 Could Leave Your Retirement Lacking. Here’s Why.

Social Security is a major source of retirement income for most Americans. As of September 2023, the average retired worker received a monthly benefit of $1,841.27, which translates to over $22,000 in inflation-protected income per year.

There are several factors that determine how much you’ll get from the program when you retire. Your income is the primary factor, because the Social Security Administration (SSA) keeps a record of your earnings throughout your career and uses this when calculating your benefit. The formula takes as many as 35 years of work into account, so if you have worked for fewer years, it will lower your monthly benefit.

While income and the length of your work history are certainly important, there’s more to the story. The age at which you start collecting Social Security retirement benefits can have a big impact on your monthly checks, and you need to know what to expect before you make any claiming decisions.

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The penalty for claiming Social Security early

Your Social Security retirement benefit is calculated with a formula that considers your highest 35 years of inflation-adjusted earnings. But this formula assumes that you start collecting at your full retirement age, or FRA.

Your FRA depends on when you were born. For American workers born in 1960 or later, full retirement age is 67, and for other birth years, it is as follows:

Data source: SSA.

If you qualify for retirement benefits, you can start collecting anytime beginning at 62. But if you start before you reach FRA, your monthly benefit will be permanently reduced. If your full retirement age is 67, here’s how it could impact your benefit depending on when you decide to start collecting it:

Data source: SSA and author’s own calculations.

As you can see, the age at which you decide to claim can make a big difference. If you would be entitled to a $2,000 monthly benefit at full retirement age, the difference between claiming at 62 and 70 is more than $1,000 per month. For most Americans, that can have a significant effect on their lifestyle after retirement.

The bottom line

To be sure, Social Security is designed so that the average retirees get roughly the same amount of money throughout their retirement, regardless of how old they are when they start collecting. In other words, the additional years you collect benefits if you claim at 62 will help offset the reduction to your monthly benefit.

However, keep in mind that Social Security is the only inflation-protected source of income that many retirees have, so it’s important to make sure that you know what to expect. A 30% reduction in Social Security income could have a significant effect on your quality of life after retirement, so be sure that you don’t start collecting too early.

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