Planning to get Social Security at 62? 3 reasons to wait until age 70

(Adam Levine Weinberg)

The big question for Americans nearing retirement is when to apply Social Security benefits. While the US government has set the full retirement age at 67 for people born in 1960 or later, Americans can choose to receive reduced Social Security benefits as early as 62 — or wait past the full retirement age in exchange for a higher monthly payment.

Starting Social Security benefits at age 62 It might have meaning under certain conditions. However, waiting at least until your full retirement age—and the ideal age of 70—to claim Social Security is usually the best option. Here are three important reasons for delaying getting Social Security.

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Guaranteed Income Maximization

Social Security reduces your monthly benefit for life if benefits start before full retirement age. If you were born in 1960 or later and choose to start receiving benefits at age 62, your monthly check will be reduced by 30% compared to what you would receive at age 67, your full retirement age. By contrast, for each year you wait past your full retirement age (up to age 70), your future monthly benefits increase by 8%.

As a result, your monthly benefits will be 77% higher if you start taking Social Security at age 70 than you will receive at age 62. Here’s how it will affect a retiree with hypothetical benefits at full retirement age of $1,745 a month in line with The national average.

Age at which benefits begin

Monthly Social Security Payments

62

$1,222

67 (full retirement age)

$1,745

70

$2,164

Source: author accounts. Note: Amounts are rounded to the nearest dollar.

with defined benefit pension plans Social Security is becoming increasingly scarce in the United States, and is the only source of guaranteed lifetime income for many seniors. Maximizing this guaranteed income by waiting until age 70 to receive benefits reduces the risk of running out of money or needing to make painful lifestyle cuts if you live too long or if your investments are performing worse than expected.

Of course, someone who starts collecting benefits at 62 shelf life gets eight more years of payments than someone who waits until 70. But if you live past age 80, you’ll collect more Social Security payments over your lifetime by deferring benefits until age 70.

The average life expectancy of a 62-year-old male is about 20 years; For a 62-year-old female, it is over 23 years old. Thus, the average person approaching retirement age will live past the “break-even” point and collect more Social Security by waiting for their benefits to begin.

Your husband alive can keep your benefits

The logic of waiting until age 70 to claim Social Security is stronger if you are married and have a higher earnings history than your spouse. If you die first, your surviving spouse can switch to your (higher) benefits, assuming they have reached full retirement age. (The interest will decrease if they are younger.)

The combined average life expectancy of two people of 62 years of age is 29 years more. On average, at least one spouse will live to the age of 91. It’s easy enough to justify waiting for Social Security benefits to start.

Image source: Getty Images.

Tax cuts and benefits

Finally, many Americans are still employed at age 62. The more income you earn at that age, the stronger the wait to claim Social Security benefits.

First, before the year you reach your full retirement age, Social Security reduces your benefit payments by $1 for every $2 of annual work income over $1,560 (as of 2022). Obviously, it is very easy to exceed this profit limit.

If your benefit payments are reduced for this reason, Social Security will recalculate your benefit after you reach your full retirement age to make up for what was withheld. However, getting Social Security at 62 is rarely beneficial if you are still working full time.

Second, up to 85% of Social Security benefit payments can be subject to federal income tax, depending on your “combined income”: adjusted gross income plus non-taxable interest income and half of your Social Security benefits. (Some states tax Social Security benefits, too.)

Taxable interest rate

Combined income (individual)

Combined income (combined)

0%

Less than $25,000

Less than $32,000

up to 50%

$25,000 – $34,000

$32,000 – $44,000

up to 85%

Over $34,000

Over $44,000

Data source: Social Security Administration. Table by author.

If you claim Social Security at age 62 and still work, you will likely owe tax on 85% of your benefits payments. By contrast, after retirement, your income is likely to be lower. This could result in a lower percentage of your Social Security benefits being taxable — or at least put you in a lower tax bracket.

Your mileage may vary

Personal finance is personal. For some people, claiming Social Security at age 62 makes sense despite the drawbacks outlined here.

However, if you’re considering applying for Social Security benefits at 62, you should think twice before pulling the trigger. Getting Social Security early will result in you (and possibly your spouse) making lower monthly payments for life and may also increase your tax burden. It’s not a decision that should be taken lightly.

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