Claiming Social Security at 62 can provide income several years before full retirement age, but the decision comes with a permanent reduction in monthly benefits. For people whose full retirement age is 67, claiming at 62 can reduce the retirement benefit by as much as 30%.
That reduction can also matter to married couples. A surviving spouse may qualify for a survivor benefit based on the deceased worker’s benefit, subject to Social Security’s rules. As a result, the timing of one spouse’s claim can become an important part of a household’s retirement-income strategy.
For example, consider a worker whose benefit at full retirement age would be $2,000 per month. If that worker claims at 62, the monthly benefit could fall to about $1,400. If the worker later dies and the spouse qualifies for a survivor benefit, the survivor benefit can be based on the amount the deceased worker was receiving, rather than the higher amount that could have been available by waiting.
Early Filing
Social Security allows eligible workers to begin retirement benefits at age 62. However, claiming before full retirement age results in a permanent reduction.
For people born in 1960 or later, full retirement age is 67. A worker with a $2,000 monthly benefit at 67 could receive approximately $1,400 by claiming at 62, assuming the 30% maximum reduction applies.
The trade-off is straightforward: claiming earlier provides income sooner, while waiting provides a larger monthly benefit later.
There is no universal claiming age that works for every retiree. Health, employment income, savings, household expenses, life expectancy and the needs of a spouse can all affect the decision.
Survivor Benefits
The decision can become more significant when one spouse is the higher earner.
Social Security survivor benefits are generally based on the deceased worker’s benefit amount. A surviving spouse who has reached survivor full retirement age can generally receive up to 100% of the deceased worker’s benefit, subject to eligibility and other rules.
Consider two simplified scenarios. In the first, a worker waits until full retirement age and receives $2,000 per month. In the second, the same worker claims at 62 and receives $1,400.
If the worker dies first and the surviving spouse qualifies for the applicable survivor benefit, the difference in the underlying benefit can affect the household’s future Social Security income.
This is particularly relevant because survivor benefits can become the primary Social Security income for the surviving spouse.
COLA
Social Security benefits are generally adjusted each year through a cost-of-living adjustment, or COLA.
A lower starting benefit means that percentage-based increases are applied to a smaller amount. For example, a 2% increase on a $1,400 monthly benefit produces a smaller dollar increase than the same percentage applied to a $2,000 benefit.
Over many years, those differences can add up.
However, the effect of COLAs should not be considered in isolation. The value of claiming early or waiting depends on a retiree’s entire financial situation, including other sources of income and how long benefits are ultimately received.
Income
Retirement savings can also influence the Social Security decision.
Some retirees use withdrawals from investment accounts to cover expenses while waiting for a larger Social Security benefit. Others may continue working, use pension income or draw on cash reserves.
The commonly cited 4% withdrawal rule is one approach retirees have used to estimate sustainable portfolio withdrawals, but it is not a guarantee. Market returns, inflation, taxes, investment performance and the length of retirement can all affect how long a portfolio lasts.
A different way to examine the problem is to calculate the gap between essential expenses and guaranteed income.
For example, if essential expenses total $5,000 per month and guaranteed income from Social Security and pensions provides $3,500, the household has a $1,500 monthly income gap. Retirement savings or portfolio income would need to cover that difference.
Planning
The choice between claiming at 62 and waiting until full retirement age is ultimately a personal financial decision.
Claiming early can provide income sooner and may be appropriate for some households. Waiting can produce a larger monthly benefit and may be particularly relevant when one spouse has a substantially higher Social Security benefit and survivor protection is an important consideration.
Couples should also consider how taxes, health, employment, other retirement assets and expected longevity could change the outcome.
A Social Security claiming decision is therefore more than a comparison between today’s paycheck and a larger future check. For married households, it can also affect the income available to the surviving spouse. Running the numbers for both spouses, including potential survivor benefits, can provide a clearer picture before either person files.
