Planning to Take Social Security at 62? 3 Reasons to Wait Until 70

A big question for Americans nearing retirement is when to file for Social Security benefits. While the U.S. government has set full retirement age at 67 for people born in 1960 or later, Americans can choose to take a reduced Social Security benefit as early as age 62 -- or wait beyond full retirement age in exchange for a higher monthly payment.

Starting Social Security benefits at age 62 may make sense under certain circumstances. However, waiting until at least full retirement age -- and ideally age 70 -- to claim Social Security is usually the better option. Here are three important reasons to delay taking Social Security.

Maximize guaranteed income

Social Security reduces your monthly benefit for life if you start benefits before full retirement age. If you were born in 1960 or thereafter and choose to begin taking benefits at 62, your monthly check will be reduced by 30% compared to what you would receive at age 67, your full retirement age. By contrast, for every year that you wait beyond full retirement age (up to age 70), your future monthly benefit increases by 8%.

As a result, your monthly benefit will be 77% higher if you begin taking Social Security at age 70 compared to what you would receive at age 62. Here's how that would affect a retiree with a hypothetical benefit at full retirement age of $1,745 per month, in line with the national average.

Source: Author's calculations. Note: Amounts rounded to the nearest dollar.

With defined benefit pension plans becoming increasingly rare in the U.S., Social Security is the only source of guaranteed lifetime income for many seniors. Maximizing that guaranteed income by waiting until age 70 to take benefits reduces the risk that you'll run out of money or need to make painful lifestyle cutbacks if you live a long time or your investments perform worse than expected.

Of course, someone who begins collecting benefits at 62 racks up eight extra years of payments compared to someone who waits until 70. But if you live past age 80, you would collect more Social Security payments over your lifetime by postponing benefits to age 70.

The average life expectancy for a 62-year-old male is approximately 20 years more; for a 62-year-old female, it's 23 years more. Thus, the average person approaching retirement age will live past the "breakeven" point and collect more from Social Security by waiting to start their benefits.

Your surviving spouse can keep your benefits

The logic to waiting until age 70 to claim Social Security is even stronger if you are married and have a higher earnings history than your spouse. If you pass away first, your surviving spouse can switch to your (higher) benefit, assuming they have reached full retirement age. (The benefit would be reduced if they are younger.)

The joint life expectancy for two people who are each 62 years old is 29 years more. On average, at least one spouse will live to age 91. That's easily long enough to justify waiting to start Social Security benefits.

Image source: Getty Images.

Taxes and benefit reductions

Lastly, many Americans are still working at age 62. The higher your income at that age, the stronger the case for waiting to claim Social Security benefits.

First, prior to the year you reach full retirement age, Social Security reduces your benefit payments by $1 for every $2 of annual employment income above $19,560 (as of 2022). Obviously, it's very easy to exceed this earnings threshold.

If you have benefit payments reduced for this reason, Social Security will recalculate your benefit after you reach full retirement age to make up for what was withheld. Still, taking Social Security at 62 rarely pencils out favorably if you are still working full-time.

Second, up to 85% of Social Security benefit payments can be subject to federal income tax, depending on your "combined income": adjusted gross income plus nontaxable interest income and half of your Social Security benefits. (A handful of states tax Social Security benefits, too.)

Data source: Social Security Administration. Table by author.

If you claim Social Security at 62 and are still working, chances are you'll owe tax on 85% of your benefit payments. By contrast, after you retire, your income will likely be lower. That could lead to a lower percentage of your Social Security benefits being taxable -- or at least put you in a lower tax bracket.

Your mileage may vary

Personal finance is personal. For some people, claiming Social Security at age 62 makes sense despite the disadvantages described here.

Nevertheless, if you're considering filing for Social Security benefits at 62, you should think hard before pulling the trigger. Taking Social Security early will lock you (and potentially your spouse) into lower monthly payments for life and could also increase your tax burden. It's not a decision to be taken lightly.