Financial Reasons for Early Claiming
For many, claiming Social Security at 62 is a matter of financial necessity. The immediate access to income can be critical for covering living expenses, especially if they have stopped working sooner than planned. A 2023 study by the Center for Retirement Research at Boston College noted that individuals with greater financial stress are less likely to claim early, but those with limited options often rely on Social Security for immediate cash flow.
- Need for immediate income: Job loss, economic downturns, or insufficient personal savings can force retirees to rely on Social Security as their primary or only source of income. During the 2008 recession, the number of eligible claimants taking benefits at 62 surged significantly due to tough economic conditions.
- Covering immediate debt: Some people choose to use the early benefits to pay down high-interest debt, such as credit cards. This strategy can reduce overall financial stress and potentially save a significant amount of money in interest payments over time.
- Preserving other investments: Financial strategists point out that claiming Social Security early allows some retirees to avoid drawing down their personal savings, 401(k)s, or other investments prematurely, giving those assets more time to grow.
Health and Longevity Factors
An individual's health and life expectancy are significant considerations when deciding to claim early. The actuarial adjustments of Social Security are based on average life expectancy, but personal circumstances can make early claiming a rational choice.
- Poor health and shorter life expectancy: For those in poor health with a family history of shorter lifespans, taking Social Security at 62 may be the best way to maximize their lifetime benefits. There is a risk that delaying benefits will result in receiving less in total benefits if they do not live long enough to reach the break-even point.
- Physically taxing jobs: Some workers in demanding physical professions simply can no longer continue working to their full retirement age. For these individuals, early retirement is a necessity, not a choice. Taking Social Security at 62 provides an income stream to replace their earnings.
- Enjoying retirement while healthy: Some retirees prioritize enjoying their retirement while they are still healthy and able to travel or participate in other activities. They may fear that waiting for a larger benefit could mean missing out on their healthiest, most active years.
Spousal and Survivor Benefit Strategies
Married couples can use early claiming as part of a broader strategy to maximize household income. The decision is not made in a vacuum, but within the context of both partners' benefits and their potential longevity.
- Maximizing household income: In a couple where one spouse is a high earner and the other has a lower benefit, the lower-earning spouse might claim early. This provides an immediate income stream for the household while allowing the higher-earning spouse to delay claiming until age 70 to maximize their benefits and ensure a higher survivor benefit.
- Triggering spousal benefits: A spouse cannot claim a spousal benefit until the primary worker has filed for their own benefits. If a non-working or low-earning spouse needs an income source, the working spouse may claim early to trigger spousal benefits for their partner.
The Psychology of Claiming
Emotional and psychological factors also play a powerful role in the decision-making process. For many, Social Security represents a sense of earned entitlement.
- Sense of ownership: After decades of paying payroll taxes, many people feel a strong sense of ownership and want to begin receiving what they view as their money as soon as they can. This sentiment can be a powerful motivator that overrides purely financial calculations.
- Loss aversion: Some people are more focused on the immediate cash they can receive at age 62 than the deferred, larger payments they could get later. Behavioral economics refers to this as loss aversion—the tendency to prefer avoiding losses (the reduced amount of early payments) over acquiring equivalent gains (the higher payments from delaying).
- Fear and distrust: A long-standing fear among some retirees is that Social Security will run out of money. Despite assurances from the Social Security Administration, this concern drives some to claim early, believing that a smaller, guaranteed check now is better than a potentially larger, but uncertain, benefit later.
Comparison of Early vs. Delayed Claiming
The decision to claim Social Security at 62 involves a significant trade-off between receiving benefits sooner and receiving a larger monthly amount later. This comparison illustrates the key differences.
| Feature | Claiming at Age 62 (Earliest Eligibility) | Claiming at Full Retirement Age (FRA) | Claiming at Age 70 (Maximum Benefit) |
|---|---|---|---|
| Benefit Amount | Permanently reduced by up to 30%. | Receive 100% of your calculated Primary Insurance Amount. | Permanently increased by 8% per year past FRA, up to age 70. |
| Access to Income | Immediate access to benefits at age 62. | Access begins at FRA (66 or 67). | Delayed access, but with maximum monthly payments. |
| Lifetime Benefits | Depends on life expectancy. If you live less than the break-even age (typically 78-80), you may receive more in total. | Actuarially balanced to pay roughly the same total benefits over an average lifetime as early claiming. | Depends on life expectancy. If you live longer than the break-even age, you may receive more in total benefits. |
| Survivors Benefit | Results in a smaller potential survivor benefit for a surviving spouse. | Standard survivor benefit for a surviving spouse based on the higher earner's full benefit amount. | Results in the highest possible survivor benefit for a surviving spouse. |
| Earnings Test | Subject to annual earnings limits until FRA; benefits are temporarily withheld if earned income exceeds the limit. | No earnings test; you can earn unlimited income without affecting benefits. | No earnings test; you can earn unlimited income without affecting benefits. |
How Your Earnings and Health Factors In
The decision of when to claim Social Security is highly personal and depends on a mix of individual factors. One key variable is a person's earnings history. Social Security benefits are based on your highest 35 years of earnings. If you retire early at 62, any years between 62 and your 35th year with no earnings will be filled with zeros, potentially lowering your benefit amount. Working a few extra years, especially during high-earning periods, can boost your final benefit calculation significantly.
Health status is another critical consideration. While life expectancy calculators can provide a general estimate, individuals with chronic conditions or those who have had physically demanding jobs may have a more realistic outlook on their longevity. For these people, the trade-off between a lower monthly check and collecting benefits sooner to enjoy them is a logical choice. Conversely, individuals with excellent health and a family history of longevity have a strong financial incentive to delay claiming, as they are more likely to live past the break-even age.
Conclusion: Personal Circumstances Dictate the Best Choice
While delaying Social Security until full retirement age or later can result in a substantially higher monthly payment, the fact is that for many people, waiting is not a feasible option. The most common reasons why do most people take Social Security at 62 are immediate financial needs, health concerns, and the practical desire to retire from a physically demanding job. The choice is a complex one, involving careful consideration of personal health, current finances, marital status, and future life goals. Ultimately, the best time to claim benefits is not a universal age, but one that aligns with an individual's unique situation and priorities.
