Why Filing at 62 Costs This Retiree 30% of Every Social Security Check for Life

Some of the biggest financial choices you might have to make in your lifetime are likely to center around retirement. When should you stop working? Is it too soon to tap your savings? And when should you sign up for Social Security benefits?

There’s a lot riding on your Social Security filing decision. Though your monthly benefit in retirement is based on your personal wage history, your filing age also helps determine how much money you get each month. And one claiming choice in particular could result in reduced benefits for life.

Be careful when claiming Social Security at 62

Because 62 is the earliest age to file for Social Security, it can be tempting to sign up then. But it’s a decision that could prove costly.

Let’s imagine John is getting ready to retire at 62. John has savings and a pension, but claiming Social Security would give him extra spending money.

If John is 62, his full retirement age (FRA) for Social Security is 67. If he files for benefits at 62, he’ll reduce those monthly checks by 30% for the rest of his life.

John might think that’s not such a big problem, since he has savings and a pension. But what if the pension is tiny and his savings eventually run out? At that point, John is looking at much smaller Social Security checks for life because he didn’t want to wait to get that money.

Choose your filing age carefully

In our example, John is choosing to claim Social Security at 62 when waiting is an option. That’s not always the case.

Let’s say you’re laid off at 62 and can’t find another job. If you don’t have savings, you may have no choice but to claim Social Security right away to cover your expenses and avoid costly debt.

The point, however, is that if you don’t have a compelling reason to claim Social Security at 62, you may want to hold off. Filing early slashes your benefits to a large degree, and it’s a choice you might regret down the line if other income streams run dry and your expenses go up.

You should also recognize that claiming Social Security at 62 means leaving a spouse with smaller survivor benefits if you’re the higher earner in your household. If you’re not married, that’s obviously not a concern. But if you’re married, are the higher earner, and have a much younger spouse, that’s another layer to think about.

Finally, do remember that Social Security benefits are eligible to get a cost-of-living adjustment every year so they’re able to keep up with inflation. If you slash your benefits by claiming Social Security at 62, every raise that arrives is apt to result in a smaller increase, since you’ll be starting with a lower baseline.

This isn’t to say that claiming Social Security at 62 is always a bad idea. The takeaway, rather, is to truly make sure you understand the consequences of doing so before locking in your filing age and accepting those reduced checks for good.

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