Considering Taking Social Security at Age 62? Why You May Be Hurting More Than Just Yourself

The older couple looks at the bill in confusion from an unexpected expense.
Andrii Zastrozhnov / Getty Images/iStockphoto

Anyone familiar with the way Social Security works probably knows that the longer you wait to file for retirement benefits, the higher your monthly payment. You can claim benefits as early as age 62, but that’s almost always the wrong move from a strict financial standpoint. Even so, a lot of people do claim benefits at 62 — and they might be hurting more than themselves financially.

When millions of Americans claim Social Security at age 62, it puts “more strain on the system’s trust fund,” according to John F. Wasik, author of “Lincolnomics” and 18 other books.

“As the average American gets older, that will put even more pressure on the system,” Wasik wrote in a recent column for Forbes.

The trust fund he’s referring to is the Old Age and Survivors Insurance (OASI) Trust Fund, a budget surplus that currently pays for about 23% of Social Security benefits. The OASI fund is expected to run out of money in about a decade. When it does, Social Security will have to depend solely on payroll taxes for funding.

The reason the OASI fund is rapidly depleting is because many baby boomers have reached retirement age and started claiming benefits. The large population of boomers helped contribute to the Social Security surplus when they were working and paying into the system. Now that they are collecting Social Security rather than contributing to it, the system is being drained.

Are You Retirement Ready?

This is why the Social Security Administration incentivizes retirees to wait longer to collect benefits by offering them bigger monthly payments. When you delay filing for Social Security, you not only boost your benefit — you also keep the SSA from having to pay you immediately.

However, when you file for benefits at age 62 rather than wait for full retirement age or later, one of the SSA’s key budget strategies goes out the window. Meanwhile, you could take a huge personal financial hit as well.

As previously reported by GOBankingRates, here are four advantages of waiting to claim Social Security benefits beyond age 62:

  1. Delaying benefits to age 70 instead of 62 increases monthly benefits by 77% in inflation-adjusted terms, according to a paper in the “Journal of Financial Planning” by Wade Pfau and Steve Parrish.
  2. Claiming benefits as early as age 62 results in lifetime benefits that are about 30% less than what they’d be at full retirement age. Claiming at full retirement age gives you 100% of your earned benefit, while waiting until age 70 gives you 124% of what you’d get at full retirement age.
  3. Waiting until age 70 to claim Social Security would boost recipients’ lifetime discretionary spending by a median of $182,370 in today’s dollars, according to a study conducted by David Altig of the Federal Reserve Bank of Atlanta, Laurence Kotlikoff of Boston University and Victor Yifan Ye, a research scientist at Opendoor Technologies.
  4. An analysis from Fidelity ran the numbers on a hypothetical situation involving a person with typical career earnings who turned 62 in 2022. If the person waits until age 67 to collect Social Security, they will receive about $2,000 a month. However, if they begin taking benefits at age 62, they will only receive $1,400 a month. If the person starts collecting at age 67 and lives until age 90, they will have received about $600,000 in Social Security benefits during the course of their retirement, spread over 23 years. If they started collecting at age 62, their total payout over 28 years would be about $470,400 — a difference of nearly $130,000. The difference would be even bigger if they waited until age 70 to collect.

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