Age 62: The most popular, but is it the best?
Age 62 has historically been the most popular age for Americans to claim Social Security benefits. While this is the earliest age you can claim, doing so results in a permanent reduction in your monthly benefit. For those born in 1960 or later, claiming at 62 means a 30% reduction from your full retirement benefit. For instance, a $1,500 full retirement benefit would be reduced to $1,050 per month if claimed at age 62.
Why people claim early
Several factors contribute to the popularity of early claiming:
- Immediate financial need: Many individuals need the income as soon as possible due to insufficient savings.
- Health concerns: Those with health issues or shorter life expectancy in their family history might claim early to maximize their total payout over their lifetime.
- Spousal benefits: Sometimes a lower-earning spouse claims early while the higher earner delays their claim.
The shift towards later claiming
The trend of claiming at age 62 has been declining over the past two decades, with the average claiming age increasing. This shift is partly due to a higher full retirement age (FRA) for many and a better understanding of the benefits of delaying.
Full Retirement Age (FRA) and Delayed Retirement Credits
Your FRA is the age you can receive 100% of your Social Security benefit. For those born in 1960 or later, the FRA is 67. For each year you delay claiming past your FRA, up to age 70, you earn delayed retirement credits, increasing your monthly benefit by 8% per year. This can result in a significant increase, potentially 24% to 32% more than your full retirement benefit if you wait until age 70.
Comparing Claiming Ages
Here's a comparison of claiming strategies for someone with an FRA of 67 and a hypothetical $2,000 monthly full retirement benefit:
| Claiming Age | Percent of Full Benefit | Estimated Monthly Benefit | Considerations |
|---|---|---|---|
| 62 (Early) | 70% | $1,400 | Provides immediate income but permanently reduces benefits. May be suitable for those with health concerns or urgent financial needs. |
| 67 (FRA) | 100% | $2,000 | Receive your full earned benefit. A balanced approach for many. |
| 70 (Max) | 124% | $2,480 | Maximizes monthly benefits for life. Often the optimal strategy for maximizing lifetime income, especially for those with a longer life expectancy. |
The long-term benefits of delaying
Research indicates that a majority of retirees could significantly increase their lifetime Social Security income by delaying their claims. delaying benefits often leads to a higher total payout over a typical lifespan.
Conclusion
While age 62 is the most popular age to claim Social Security, it typically results in a permanently reduced benefit. The decision of when to claim is personal and should be based on your financial situation, health, and life expectancy. Delaying benefits, particularly until age 70, can lead to substantially higher monthly payments for life. Consulting a financial advisor can provide personalized guidance for this important decision.
