Thinking About Claiming Social Security at 62? 4 Ways That Might Cost You

One of the most popular ages to claim Social Security is also the earliest: 62. It's easy to understand why so many people apply right away. The sooner you sign up, the more months of checks you receive over your lifetime.

But there are some hidden drawbacks to this approach. Here are four reasons why claiming at 62 isn't the best move for everyone.

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1. It'll shrink your monthly checks

The Social Security Administration assigns you a full retirement age (FRA) based on your birth year. You must put off applying for Social Security until this age if you hope to claim the full benefit you've earned based on your work history. The following table gives the FRAs for today's workers:

Source: Social Security Administration.

If you apply before your FRA, the government shrinks your monthly checks by:

• 5/9 of 1% per month for up to 36 months
• 5/12 of 1% per month for any additional months of early claiming beyond 36 months

Put simply, if your FRA is 66 and you apply for Social Security in your first month of eligibility, your checks will be 25% smaller than they would've been if you'd waited until your FRA to sign up. And those with an FRA of 67 lose 30% from their checks if they sign up right away.

If you qualified for the average benefit of $1,848 per month at your FRA and you applied for Social Security at 62, you'd only receive $1,386 per month if your FRA was 66, or $1,294 per month if your FRA was 67.

Every month you wait to claim increases your monthly check. This can be a motivating reason to delay Social Security benefits. If you'd like, you can wait as long as age 70, when you qualify for your maximum benefit. This is 124% of your FRA benefit if your FRA is 67, or 132% if your FRA is 66.

2. It could lead to a smaller lifetime benefit

Since it leads to smaller checks, signing up for Social Security at 62 could potentially reduce the lifetime benefit you receive from the program. But this isn't always the case. It depends on your life expectancy.

If you think you'll only live until 71, for example, delaying benefits until 70 doesn't make a lot of sense. You'd get much more by claiming at 62 and collecting as much as you can during your lifetime.

But eventually, there's a tipping point -- typically in your mid-80s -- where someone who delayed benefits would wind up with a larger lifetime benefit than they would have gotten had they signed up at 62. So for those who expect to live long lives and can afford to delay Social Security until later, claiming at 62 probably isn't the best move.

It's up to you to decide when you feel is the best time to claim. You need to weigh your financial situation and whether you believe you can afford to wait, as well as your life expectancy.

3. Smaller cost-of-living adjustments (COLAs)

Social Security cost-of-living adjustments (COLAs) are adjustments the Social Security Administration makes to help your benefits keep pace with inflation. The COLA is a percentage -- for 2024, it's 3.2%. Since it's calculated this way, those who claim at 62 see a smaller dollar-amount increase than they would have had they waited to sign up.

Let's consider two people who qualify for the $1,848 average monthly benefit at their FRA of 67. One waited until 67 to claim, and the other signed up right away at 62, making their monthly benefit $1,294 per month. A 3.2% COLA means a $59 increase for the first person, but the second person would only get $41 more for 2024. This is true for every year the Social Security Administration offers a COLA.

4. You could lose money to the earnings test

The Social Security Administration withholds money from the Social Security checks of those who are working and claiming benefits before their FRA. In 2023, you lose $1 for every $2 you earn over $21,240 if you'll be under your FRA all year. If you'll reach your FRA in 2023, you only lose $1 for every $3 you earn over $56,520. In 2024, these limits rise to $22,320 and $59,520, respectively.

This money isn't gone forever. When you reach your FRA, the government recalculates your benefit and gives you larger checks going forward to account for what it previously withheld. But your new benefit still won't be as large as what you would have gotten had you delayed Social Security in the first place.

None of these things are intended to deter you from claiming Social Security at 62 if you really want to. For some people, it can be the best move. Or it may be your only option if you have no other sources of income. But it's important to understand the implications of your decision before you go through with it. If you don't need Social Security today and you are concerned about short-changing yourself, you may want to consider putting off your application for a little while.