When planning retirement, one of the most consequential decisions a worker can make is when to begin claiming Social Security benefits.
While eligibility starts as early as age 62, doing so comes with a significant cost.
Claiming benefits at 62 rather than waiting until full retirement age (FRA) permanently reduces the amount of your monthly Social Security check, potentially by as much as 30 percent for many workers.
Under current law, the FRA for individuals born in 1960 or later is 67, meaning that benefits are calculated to be paid in full at that age.
If you elect to start benefits five years early at 62, the actuarial reduction applied to your benefit amount can reach 30 percent of what you would otherwise receive at FRA.
That reduction is not temporary, it persists for as long as you live and continues to affect cost-of-living adjustments (COLA) based on the reduced base amount.
For example, if your full retirement benefit at age 67 would be $2,000 per month, claiming at age 62 could reduce that to roughly $1,400 per month.
Over the course of a long retirement, that difference, $600 per month or $7,200 per year, can add up to tens or even hundreds of thousands of dollars less in lifetime income.
Why claiming early costs so much
The Social Security Administration applies reductions based on the number of months a beneficiary claims before their FRA. From age 62 to the FRA, the monthly reduction is computed using predefined actuarial factors.
The effect is largest for older full retirement ages because the gap between age 62 and FRA is longer, up to 60 months for those with an FRA of 67, leading to the maximum 30 percent reduction.
This reduction occurs because claiming early increases the total number of years benefits are expected to be paid, so each monthly payment is actuarially reduced to account for the longer payout period.
Many retirees find early benefits tempting because they provide immediate income, and in some situations, such as poor health or lack of other financial resources, claiming at 62 can make sense.
Financial firms like Fidelity note that early claiming provides guaranteed income, but caution that “your annual cost-of-living adjustment (COLA) is based on your benefits.” If you start at a lower benefit due to early claiming, your COLA-adjusted payments will be permanently lower as well.
In contrast, delaying benefits past the FRA can increase monthly payments. For each year you delay up to age 70, Social Security adds approximately 8 percent per year in Delayed Retirement Credits.
Waiting until age 70 could yield a significantly higher monthly benefit compared with claiming at 62, even as much as 32 percent more than the FRA amount, depending on your birth year.
Financial planners stress that timing Social Security benefits should fit within a broader retirement income strategy.
Variables such as expected longevity, health, other retirement income sources, and tax implications all play a role in determining whether the reduced early benefit is worth the trade-off.
In summary, starting Social Security at age 62 instead of waiting until full retirement age can result in a permanent reduction of up to 30 percent in your monthly benefit, a critical factor that retirees must weigh carefully in retirement planning.