Claiming Social Security at 62 gives you three extra years of payments, but each monthly check is permanently smaller than it would be if you had waited until 65. Delaying benefits means giving up that early income in exchange for a larger monthly payment later. The break-even point shows when those larger checks catch up to the benefits collected by claiming early. Comparing that crossover age with your income needs, life expectancy and other retirement resources can help put the tradeoff in context.
Afinancial advisorcan review a range of retirement strategies with you, including your optimum retirement age.
How Social Security Benefits Change From 62 to 65
Social Security benefits can generally begin at age 62. However, starting before full retirement age (FRA) permanently reduces the monthly amount you receive. FRA depends on your birth year and ranges from 66 to 67 for workers approaching retirement today. For anyone born in 1960 or later, FRA is 67.
The Social Security Administration calculates early-claiming reductions based on how many months before FRA you begin collecting benefits. For the first 36 months before FRA, the benefit is generally reduced by 5/9 of 1% for each month. If you claim more than 36 months early, the reduction for those additional months is generally 5/12 of 1% per month.1
For a worker with an FRA of 67, claiming at 62 generally results in a 30% reduction. This means the worker receives about 70% of the benefit they would have received at FRA. Someone entitled to $2,500 per month at 67, for example, would receive approximately $1,750 per month by claiming at 62.
Waiting until 65 reduces the early-claiming penalty because benefits begin only 24 months before an FRA of 67. In that case, the reduction is about 13.3%, leaving the worker with approximately 86.7% of their FRA benefit. Using the same $2,500, claiming at 65 would produce a monthly payment of roughly $2,167 before considering cost-of-living adjustments.
This means waiting from 62 until 65 could increase the initial monthly benefit by more than 23% in this example. However, the tradeoff is significant. The retiree who waits until 65 gives up three years of Social Security payments that could otherwise have been collected. Your exact benefit at 62 or 65 depends on your birth year, FRA and earnings record.
Reviewing your Social Security estimates can therefore provide a more useful comparison than relying on general percentages alone.
How to Calculate the Break-Even Point
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