Here's What Claiming Social Security at 62 Will Really Cost Millennials, According to ChatGPT

For millennials, claiming Social Security can feel far off, almost hypothetical. But one decision could shape their retirement more than almost anything else. And it starts with a simple question: take the benefits early, or wait?

To find out how much claiming Social Security early, at age 62, could cost millennials, I asked ChatGPT for a little assistance.

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What Claiming at 62 Actually Means

Taking Social Security at 62 might feel like getting ahead, but it actually means accepting a reduced benefit for life, ChatGPT warned. For millennials, whose full retirement age is 67, that reduction is steep. For every year until full retirement age that a person staves off claiming, they gain an additional 8% in benefits up until their maximum.

Using today’s average benefit amount as an example, if a millennial’s full retirement benefit was $2,071 per month at age 67, at age 62 that would only be $1,450 per month, a difference of over $600 per month. ChatGPT called this “a lifetime pay cut.”

The Real Cost Isn’t Monthly — It’s Lifetime

The biggest mistake millennials make is focusing on the monthly difference instead of the long-term loss, ChatGPT warned. Over decades, that smaller check adds up to a massive gap.

That $600 per month less is $7,200 per year lost. Over 20 to 25 years, that could easily be $150,000 or more, especially if those funds were invested.

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Millennials May Feel the Impact More Than Previous Generations

This isn’t just a simple retirement decision, either, the artificial intelligence (AI) said, because millennials have a longer life expectancy than older generations, which means more years of collecting reduced benefits. Their generation is vastly less likely to have pensions, though many of them have retirement plans. Costs of living increase every year, too, and with decades ahead of them until retirement, they may have more economic uncertainty to go through and less room for financial error.

Starting Smaller Also Shrinks Your Future Raises

Since Social Security benefits are based on a worker’s 35 highest-earning years. Thus, millennials whose early career years were lower and whose later years are higher paying could inadvertently cut their benefit amount doubly, by locking in a lower benefit based on fewer of their higher earning years.

Early Claiming Can Reduce What Your Partner Gets

Another often overlooked downside of claiming early, ChatGPT pointed out, is that it can impact a spouse’s financial future too. If your spouse makes less money than you, should you pass away before them, it lowers the possible amount of survivor’s benefits they could receive. This is a bigger deal in couples who have uneven earnings, especially if one spouse worked less to raise children.

When Claiming at 62 Might Still Make Sense

All of that said, there may be some situations where claiming at 62 is necessary, ChatGPT allowed. These could include situations where a person’s health concerns make it necessary or lead to a shorter life expectancy.

In some cases, immediate income needs outweigh the ability to wait until full retirement age. If a retiree has no other retirement assets, this may be their only option.

Think About Lifetime Income

ChatGPT suggested millennials should reframe the question of “When should I claim?” to “How do I maximize lifetime income and stability?” Either way, millennials should remember that this is an irreversible financial choice and every dollar makes a difference at this stage of life.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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