Why Filing for Social Security at 62 Can Quietly Cost You $750 a Month for Life
Written by
J. Arky
Edited by
Zuri Anderson
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If you are approaching the age of 62, you might be thinking it’s time to retire and start collecting Social Security.
Before you do, it might be valuable to understand how filing for benefits at that age could actually be costing you close to $800 each month for the rest of your life. Here’s how.
30% Benefit Reduction
“The allure of that monthly check coming is hard to pass up at age 62. But for most people I advise waiting until at least age 67 and in many cases until age 70, ” said Zachary Mineur, chief investment officer at Independence Square Advisors.
Mineur cautioned that if you collect at 62, which is five years before the current full retirement age (FRA) of 67, your benefit will be permanently reduced by 30%.
Dollar Drops
In dollar terms, Mineur explained if your FRA benefit comes to be $2,500 per month, filing at 62 drops that to $1,750 per month or a loss of $750 per month for life.
“Beyond age 67, your benefit increases 8% annually until the max benefit at age 70,” Mineur described, adding that for most people, the break-even age — where total lifetime benefits from waiting surpass what you’d have collected filing early-tends to be around age 80.
“If you expect to live longer than that, the math says waiting is the optimal result,” he added.
Additional Financial Risks
According to Mineur, there are other potential financially harmful reasons for collecting early: Not only the claimant’s benefits are reduced, but so are the spousal and survivor benefits, which can be especially damaging for a lower-earning spouse who may depend on those payments.
“If the claimant is still working and collects Social Security prior to age 67, a portion of those benefits could be clawed back and may also be taxable depending on how much additional income is earned,” noted Mineur, highlighting that the math and the practical don’t always line up.
Wait as Long as Possible
Mineur shared that if you have to retire early because of a layoff or medical issue, then waiting may not be a viable option.
“But it’s important to note that you don’t need to wait a full year before getting a bump in pay,” Mineur pointed out. “Every month that you wait, the payments go up by a fraction, so I generally advise to wait as long as you can.”
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