Social Security benefits: Risks of claiming early at age 62

Claiming Social Security benefits at age 62 offers immediate income but carries long-term financial implications. For individuals born in 1960 or later, the full retirement age is 67. Filing at 62 can result in a permanent reduction of approximately 30% in monthly benefit amounts compared to waiting until full retirement age.

Key risks of early filing include smaller monthly checks that receive lower cost-of-living adjustments, potential reductions in survivor benefits for a spouse, and the application of an earnings test for those who continue to work. The earnings test may lead to the withholding of benefits if wages exceed specific thresholds before reaching full retirement age.

Delaying benefits until age 65 can mitigate these reductions. For example, a worker with a full retirement age of 67 who claims at 65 would face a reduction of roughly 13.3%, compared to the 30% reduction for claiming at 62. Determining the optimal time to claim involves calculating the break-even point, where the larger monthly payments from delayed filing eventually surpass the total cumulative benefits received from early filing.