The social security retirement age has an immense impact on the monthly benefit you will receive. While you can start collecting social security as early as age 62, doing so will result in a permanent reduction in monthly benefits. As Americans live longer, healthier lives, early retirement is an increasingly popular option. However, retiring even just a few years earlier can cost you a significant amount of your total lifetime social security benefits.
When Can You Start Collecting Social Security?
Americans can start claiming social security benefits as early as age 62. However, your full retirement age for collecting full social security benefits ranges from age 66 to 67, depending on when you were born. While you can technically retire and claim benefits at 62, doing so will mean accepting permanently reduced social security benefits.
Your full retirement age is:
- Age 66 if you were born between 1943 and 1954
- Age 66 and 2 months if you were born in 1955
- Age 66 and 4 months if you were born in 1956
- Age 66 and 6 months if you were born in 1957
- Age 66 and 8 months if you were born in 1958
- Age 66 and 10 months if you were born in 1959
- Age 67 if you were born in 1960 or later
So if you want to receive your full retirement benefit, you’ll need to wait until your full retirement age. However, each year that you delay taking social security beyond your full retirement age (up to age 70), your monthly benefit will increase by about 8 percent.
How Are Social Security Benefits Calculated?
Your social security benefits are based on your average monthly earnings over your 35 highest paid years. The Social Security Administration calculates your basic benefit (known as your primary insurance amount) using a formula that takes into account your earnings history.
This primary insurance amount represents the monthly benefit you would receive if you start collecting at your full retirement age. The earlier you start benefits, the lower your monthly payment will be. Likewise, delaying benefits past your full retirement age increases your monthly benefit.
The Cost of Collecting Social Security at Age 62
Many Americans are eager to retire as early as possible. And since you can start taking social security benefits at age 62, early retirement often coincides with claiming benefits early. However, doing so comes at a steep cost.
If your normal retirement age is 67 but you start collecting benefits at 62, your monthly benefit would be reduced by 30%. This amounts to a permanent reduction for the rest of your life.
For example, if your full monthly benefit at age 67 would be $1,000, then your benefit if you take social security at 62 would only be $700 per month. That reduction in benefits adds up significantly over the course of your retirement.
Calculate Your Benefits at Age 62 vs Full Retirement Age
The Social Security calculator allows you to get a personalized estimate of your monthly benefits based on your real earnings history and expected retirement age. This estimate helps you understand how much your benefits could be reduced by taking them early.
For example, if your full monthly benefit when you reach full retirement age is estimated to be $2,000, then taking benefits at 62 would reduce your monthly payment to around $1,400. That’s $600 less per month, which adds up to over $7,000 less in benefits per year.
Over a 20 year retirement, deciding to take reduced benefits at 62 could cost you over $140,000 compared to waiting! So while you may get to retire several years earlier, the tradeoff is getting thousands of dollars less from social security over your lifetime.
Other Options for Retiring Early
Fortunately, claiming social security early is not your only option if you want to retire before age 65. Here are some other ways to fund an early retirement:
- Tap into your retirement accounts like 401ks or IRAs. You may have to pay penalties for early withdrawals, but this bridges the gap until you can collect social security.
- Downsize your home or relocate to reduce living expenses.
- Use the income from a part-time job or side-hustle.
- Rely on your spouse’s income if they plan to keep working.
- Develop multiple streams of retirement income from rental properties, dividends, etc.
The key is to create a retirement plan that allows you to retire early without being over-reliant on your social security benefits. This may require building substantial retirement savings to draw from in your early 60s.
Should You Claim Social Security Retirement Income at 62?
Deciding when to take social security depends on your personal situation. If you have little savings and cannot continue working, taking reduced benefits at 62 may be your only option. However, delaying benefits maximizes your monthly income. Ask yourself:
- How much will my monthly benefits be reduced if I claim at 62?
- What other sources of retirement income do I have?
- How long do I expect to live in retirement based on my health?
- Would I struggle to make ends meet if I wait until full retirement age?
Unless you absolutely must take early social security benefits, it pays to wait. But run the numbers for your situation to make the best choice. Thorough retirement planning can help you retire at 62 without losing too much of your social security benefits.
In summary, retiring before age 65 means giving up a significant portion of your lifetime social security benefits. While you can claim benefits as early as age 62, doing so results in a permanent reduction in monthly income. Unless you have ample sources of retirement income, it usually makes sense to wait until at least your full retirement age, if not longer. But discuss your options with a financial advisor to develop the optimal strategy for retiring early without losing too much in social security payments.
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How much money will I lose if I retire at 62 instead of 65?
The amount of money you would lose by retiring at 62 instead of 65 depends on various factors such as your average social security, full retirement age, and the number of years you choose to claim early. It is recommended to use a retirement calculator or consult with a financial advisor to get a more accurate estimate of your retirement income.
Can I take social security benefits if I retire at 62?
Yes, you can start taking social security retirement benefits as early as age 62. However, it’s important to consider that claiming benefits early will result in a reduced payment compared to waiting until your full retirement age.
What are the advantages of retiring at 62?
some advantages of retiring at 62 include having more time for hobbies, spending time with family, and enjoying your retirement earlier. However, it’s important to carefully consider the financial implications of claiming benefits early and how it may affect your overall retirement income.
What are the disadvantages of claiming early benefits?
One disadvantage of claiming social security benefits early is that your monthly payment will be permanently reduced compared to waiting until your full retirement age. Additionally, your yearly earnings may be limited if you choose to claim early before reaching your full retirement age.
Is there a calculator that can help me determine the amount I’ll lose by retiring at 62?
Yes, there are various retirement calculators available online that can help you estimate the amount of money you may lose by retiring at 62 instead of waiting until your full retirement age. These calculators take into account factors such as your average social security, early retirement reduction factors, and estimated life expectancy.
When is the full retirement age to start receiving social security benefits?
The full retirement age to start receiving social security benefits depends on your birth year. For individuals born in 1960 or later, the full retirement age is 67. However, if you were born before 1960, you can check the Social Security Administration’s website or consult with a financial advisor to determine your full retirement age.
Can I still work if I retire at 62 and collect social security benefits?
Yes, you can still work if you retire at 62 and collect social security benefits. However, if you haven’t reached your full retirement age, there may be an earnings limit that could affect your benefits. It’s important to understand how working and receiving benefits simultaneously may impact your overall retirement income.
What are delayed retirement credits and how do they work?
Delayed retirement credits are additional benefits you can earn by waiting to claim social security benefits beyond your full retirement age. For each year you delay claiming benefits, your monthly payment will increase by a certain percentage up until age 70. This can be advantageous for individuals who are able to wait and maximize their lifetime benefits.
Will waiting until age 70 result in a higher social security payment?
Yes, waiting until age 70 to claim social security benefits can result in a higher monthly payment compared to claiming benefits early. This is because you can earn delayed retirement credits which increase your payment amount for each year you delay claiming benefits beyond your full retirement age.
Can I still receive survivor benefits if I retire at 62?
Yes, you can still be eligible to receive survivor benefits if you retire at 62. Survivor benefits are separate from your own retirement benefits and may provide financial support to your eligible spouse or dependents in the event of your death. It’s important to consult with the Social Security Administration or a financial advisor to understand the eligibility requirements for survivor benefits.