One of the biggest questions people face as they approach retirement is when to start taking Social Security benefits. The options can be confusing: you can start as early as age 62, wait until your full retirement age (FRA) at 67, or even delay until age 70 to get a larger monthly payment. Let’s break down the math in simple terms to see why claiming benefits at 62 might make financial sense for you.
Understanding How Benefits Work
The Social Security Administration reduces your monthly benefits if you start early and increases them if you wait beyond your full retirement age. Here’s how it works:
- Claiming at 62: Your monthly benefits will be approximately 30% less than if you waited until 67.
- Waiting until FRA (67): You receive 100% of your calculated monthly benefits.
- Delaying until 70: For each year you delay past 67, your benefits increase by 8%, resulting in about a 24% increase overall by age 70.
Example Scenario
Let’s use an example to make this clearer. Suppose your full retirement age benefit (at 67) is $2,000 per month.
- Claim at 62: You’d receive about $1,400 per month (30% reduction).
- Claim at 67: You’d get the full $2,000 per month.
- Claim at 70: You’d receive about $2,480 per month (24% increase).
The Lifetime Payout Math
Now, let’s calculate the total benefits received under each scenario. We’ll consider how much you’d earn by the time you’re 80 years old, a common age to analyze because it’s around the average life expectancy.
Scenario 1: Claiming at 62
- Monthly benefit: $1,400
- Years collecting benefits by age 80: 18 years (62 to 80)
- Total benefits: $1,400 x 12 months x 18 years = $302,400
Scenario 2: Claiming at 67
- Monthly benefit: $2,000
- Years collecting benefits by age 80: 13 years (67 to 80)
- Total benefits: $2,000 x 12 months x 13 years = $312,000
Scenario 3: Claiming at 70
- Monthly benefit: $2,480
- Years collecting benefits by age 80: 10 years (70 to 80)
- Total benefits: $2,480 x 12 months x 10 years = $297,600
Comparing the Outcomes
- By claiming at 62, you would collect $302,400 by age 80.
- Waiting until 67 gets you $312,000, only $9,600 more.
- Delaying until 70 yields $297,600, which is actually less than claiming at 62!
While waiting until 67 seems better at first glance, there’s more to consider. If we account for how having money earlier lets you invest, pay down debt, or simply live better, the advantage of claiming at 62 becomes even clearer.
The Benefit of Enjoying Your Money While You’re Healthier
One of the biggest advantages of taking Social Security at 62 is the chance to enjoy your money while you’re still relatively healthy and active. At 62, you’re more likely to have the energy and physical ability to travel, explore new hobbies, or spend quality time with family in ways that might become harder as you age.
By the time you reach 70, health limitations and chronic conditions are more likely to set in, making activities like world travel, hiking, or simply enjoying physical pursuits more difficult. Taking your benefits earlier can give you more opportunities to live life to the fullest while your body is still cooperative, which is an invaluable aspect of retirement.
Key Considerations Before Deciding
- Your Health and Life Expectancy: If you’re healthy and have a family history of longevity, waiting could make sense. But if not, taking the benefits earlier could be more advantageous.
- Your Financial Situation: If you need the income to cover your expenses, don’t feel bad about taking benefits at 62.
- Your Retirement Plans: If you have retirement savings, you could supplement your income from Social Security, giving you flexibility.
Conclusion
The choice between taking Social Security early or waiting is deeply personal, but the math shows that for many people, collecting at 62 can be a winning strategy. It gives you more cash earlier, and when you add up the total lifetime benefits, the difference may be surprisingly small. Additionally, having access to funds sooner allows you to enjoy experiences while you’re healthier and more active.
Always consult with a financial advisor to consider your unique situation, but don’t underestimate the value of getting a head start on your Social Security benefits!