The government has confirmed that filing for Social Security benefits at 62 will result in a permanent reduction of $1,080 per month in your checks. While it is possible to legally claim benefits at age 62, doing so could have some undesired financial costs that last a lifetime.
The financial cost that comes with filing early is a lifelong cut made in exchange for accessing benefits sooner. Financial experts say that the cost is large, meaning that choosing the right age for filing may be one of the most important decisions you’ll ever make when planning for retirement.
Filing Age Determines Your Monthly Check
The Social Security Administration determines your retirement benefit using your 35 highest-earning years, adjusted for inflation.
If you were born in 1960 or later, your full retirement age (FRA) is 67. If you file before that age, your benefits will be reduced permanently. However, if you wait beyond 67, your benefit increases but only until you reach age 70.
“The earliest age you can sign up is 62. For each month you file for benefits ahead of FRA, though, those monthly checks shrink on a permanent basis,” explains Maurie Backman.
Let’s say an individual is entitled to $2,000 per month at age 67. If they claim at 62, their benefits would reduce to $1,400. If they were patient enough and delayed claiming until age 70, they would receive $2,480. That means, if the individual claims at 62 instead of 70, they end up losing $1,080 every month, which is about $13,000 in a year.
Why So Many Still Choose 62
While claiming after 67 is recommended, the most popular filing age in America is 62. Most retirees file at 62 because many of them depend heavily on Social Security. Secondly, many people choose to retire early because of burnout at work or health issues. Such reasons make it inevitable to retire early.
Financial writer Bram Berkowitz notes that while early filing leads to significant reductions, there’s no one-size-fits-all answer: “There are, of course, different reasons to claim benefits at different ages and different trade-offs as well.”
The Smart Way to Judge Whether Filing Early Works for You
Whether filing early is a good or bad decision depends on your financial situation and specifically how much you will rely on Social Security benefits. If most of your retirement income comes from your savings, then retiring at 62 may not hurt you financially. But if you rely on Social Security as your primary income, then filing at 62 would financially hurt you because you would receive smaller checks for a lifetime.
When Filing Early Makes Sense
Filing early would make sense if it enabled meaningful life choices. For example, if you are retiring early to escape a stressful job or going to take care of a loved one, it would be advisable to claim your benefits early. That would be the case too if you are suffering from some health-related issues.
Conclusion
While financial experts discourage people from filing for retirement benefits early, it isn’t inherently wrong. However, doing so permanently reduces your monthly benefits by about $1,080 per month.
This amount would make a big difference, especially for people who rely on Social Security as their primary income. However, there is no right age to file for retirement benefits. It all depends on how the decision supports your long-term financial stability.
Before deciding when to claim your benefits, do the math, understand your income needs, especially in retirement, and consider talking to a financial expert. The goal is to choose an age that does not undermine your financial status in retirement.