Retiring at 62 is the earliest age you can begin to claim Social Security benefits, and for many, it represents the first real opportunity to leave the workforce behind. While the dream of an early exit is appealing, it's crucial to understand the significant and often permanent drawbacks. The decision to stop working at 62 has profound financial, health, and lifestyle implications that can affect your quality of life for decades to come. This guide provides a comprehensive look into the cons, helping you make a fully informed choice about your retirement timeline.
The Permanent Social Security Reduction
The most significant and immediate con of retiring at 62 is the substantial, lifelong reduction in your Social Security benefits. Your Full Retirement Age (FRA) is the age at which you are entitled to 100% of your primary insurance amount (PIA), which is calculated based on your lifetime earnings. For anyone born in 1960 or later, the FRA is 67.
By claiming benefits at 62, you are starting five years before your FRA. This results in a permanent reduction of about 30% of your monthly benefit. For example:
- If your full retirement benefit at age 67 would have been $2,000 per month.
- Claiming at age 62 would reduce it to approximately $1,400 per month.
This isn't a temporary penalty; this reduction lasts for the rest of your life. Over 25 years, this difference amounts to a loss of $180,000. Furthermore, this decision also impacts potential survivor benefits for your spouse, as their benefit is often based on the amount you were receiving.
The Earnings Test
If you decide to work part-time to supplement your income after claiming benefits at 62, you'll be subject to the Social Security earnings test. In the years before you reach FRA, the Social Security Administration will withhold a portion of your benefits if your earned income exceeds a certain annual limit. For 2025, if you earn over the limit, $1 in benefits will be deducted for every $2 you earn above that threshold, potentially reducing your monthly income even further.
The Critical Healthcare Coverage Gap
Another major obstacle is healthcare. You are not eligible for Medicare until you turn 65. Retiring at 62 means you face a three-year gap where you must secure private health insurance, which is often prohibitively expensive.
Your options during this period typically include:
- COBRA: You can continue your employer's health plan for up to 18 months through COBRA. However, you are responsible for paying the full premium, plus an administrative fee. This can easily cost over $1,000 per month for an individual and significantly more for a couple.
- Affordable Care Act (ACA) Marketplace: You can purchase a plan from the Health Insurance Marketplace. While subsidies may be available depending on your income, premiums for individuals in their early 60s are among the highest.
- Spouse's Plan: If your spouse is still working and has employer-sponsored insurance, this may be your most affordable option.
Failing to secure adequate coverage during this window can expose you to catastrophic medical bills at an age when health issues often become more prevalent.
Reduced Retirement Savings and Compounding
Retiring at 62 cuts short your peak earning years. These final years in the workforce are often when your salary is at its highest, allowing for substantial contributions to your retirement accounts like a 401(k) or IRA.
By stopping work early, you lose:
- Years of Contributions: Five fewer years of saving can mean tens or even hundreds of thousands of dollars less in your nest egg.
- Employer Matches: You miss out on free money from employer 401(k) matching programs.
- Compounding Growth: Your existing savings have less time to grow through the power of compound interest before you start making withdrawals.
This shortened accumulation phase means your retirement portfolio will be smaller, forcing you to draw down a smaller principal amount for a potentially longer retirement period.
Retirement Age Financial Impact Comparison
| Feature | Retiring at 62 | Retiring at FRA (67) | Retiring at 70 |
|---|---|---|---|
| Social Security Benefit | ~70% of full benefit | 100% of full benefit | 124% of full benefit |
| Years of Savings | Stops 5 years early | Full contribution period | 3 extra contribution years |
| Investment Growth | Less time to compound | More time to compound | Maximum time to compound |
| Healthcare Coverage | 3-year gap before Medicare | No gap if working | No gap if working |
| Longevity Risk | Highest | Moderate | Lowest |
Increased Risk of Outliving Your Money
Longevity risk—the risk of outliving your assets—is a major concern for all retirees. This risk is significantly amplified when you retire at 62. Due to the combination of reduced Social Security income and a smaller retirement portfolio, you are stretching fewer assets over a longer period. Life expectancies continue to rise, and a retirement that could last 30 years or more requires a robust financial foundation that early retirement may fail to provide.
Conclusion: Weighing the Pros and Cons
While the allure of an extra five years of freedom is strong, the cons of retiring at 62 are substantial and permanent. The financial penalties associated with reduced Social Security benefits, the high cost of bridging the healthcare gap to Medicare, and the diminished size of your retirement nest egg can lead to financial strain and insecurity in your later years. This decision should only be made after careful calculation and if you have significant alternative income streams or a very large savings portfolio. For a definitive look at your own benefits, it's always best to consult the Social Security Administration. By understanding these drawbacks, you can better plan a retirement that is not only early but also secure.
