Starting Social Security at Age 62 Can Be a Costly Decision. Here’s How Much Income Retirees Could Lose

A record 3.6 million retired workers started Social Security in 2023, and 23% of those individuals claimed benefits at age 62. That is significant because Social Security payments are permanently reduced if benefits begin before full retirement age, and 62 is the age at which the reduction is most severe.

Statistically speaking, those retired workers are leaving a substantial amount of money on the table. Here are the important details.

The age at which retirees claim Social Security has a substantial impact on their lifetime benefits

Social Security benefits for retired workers depend on their lifetime income and claiming age. First, inflation-adjusted income from the 35 highest-paid years of work is run through the primary insurance amount (PIA) formula. The PIA is the benefit a worker will receive if they claim Social Security at full retirement age (FRA).

Next, the PIA is revised lower or higher for early or delayed retirement, respectively. Workers that start Social Security before FRA are penalized with a reduced benefit, meaning they get less than 100% of their PIA. But workers that delay Social Security beyond FRA are rewarded with a larger benefit, meaning they get more than 100% of their PIA.

There are two limitations. First, eligibility for retirement benefits begins at age 62, so retired workers cannot claim earlier. Second, there is no advantage to delaying benefits beyond age 70, so retired workers should never claim later.

The chart below shows the relationship between birth year and FRA. It also shows the benefit (as a percentage of the PIA) retired workers would receive if the claim Social Security at ages 62 and 70. In other words, it shows the smallest possible and the largest possible benefit for each age group.

Data source: The Social Security Administration.

As shown above, delaying benefits can substantially increase the payout. For instance, a retired worker born in 1960 or later will receive 70% of their PIA if they claim Social Security at age 62, but they will receive 124% of their PIA if they claim at age 70. Put differently, workers born in 1960 or later will increase their benefit by 77% if they claim Social Security at age 70 rather than age 62.

Statistically speaking, retired workers that claim Social Security at age 62 will shortchange themselves

The average 62-year-old male has a life expectancy of 19 years, meaning they are expected to live until age 81, according to the Social Security Administration. The average 62-year-old female has a life expectancy of 22 years, meaning they are expected to live until age 84.

We can use that information to determine how much money a hypothetical male and female leave on the table by claiming Social Security at age 62.

Men: Last year, newly awarded male beneficiaries had an average PIA of $2,194, meaning their monthly benefit would be $2,194 if they claimed Social Security at FRA, which is 67 for anyone born in 1960 or later. But their monthly benefit would be $1,536 if they claimed at age 62 and $2,721 if they claimed at age 70.

With that in mind, I multiplied those numbers by 12 to find the annual Social Security income, then multiplied the product by the life expectancy. Using that method, the expected lifetime Social Security income for the average male born in 1960 or later is listed below.

• Claim at age 62: $350,208
• Claim at age 67: $368,592
• Claim at age 70: $359,172

Women: Last year, newly awarded female beneficiaries had an average PIA of $1,739, meaning their monthly benefit would be $1,739 if they claimed Social Security at FRA. But their monthly benefit would be $1,217 if they claimed at age 62 and $2,156 if they claimed at age 70.

Using the same method described above, the expected lifetime Social Security income for the average female born in 1960 or later is listed below.

• Claim at age 62: $321,288
• Claim at age 67: $354.756
• Claim at age 70: $362,208

Here’s the bottom line, assuming an average PIA and lifespan, a hypothetical male can increase their lifetime Social Security income by roughly $18,300 by claiming retirement benefits at age 67 rather than age 62. And a hypothetical female born can increase their lifetime Social Security income by roughly $40,900 by claiming retirement benefit at age 70 rather than age 62.

Retirees with an above average lifespan will shortchange themselves to an even greater degree

The figures discussed in the previous section apply only to retirees with an average PIA and life expectancy. Anyone with a below-average lifespan may not lose money by claiming retirement benefits at age 62. But anyone with an above-average lifespan will shortchange themselves to an even great degree. Specifically, starting Social Security before age 70 becomes an increasingly costly decision as lifespan lengthens.

To illustrate that point, listed below is the expected lifetime Social Security income for the same hypothetical male, only this time they live five years longer (age 86).

• Claim at age 62: $442,368
• Claim at age 67: $500,232
• Claim at age 70: $522,432

Likewise, listed below is the expected lifetime Social Security income for the same hypothetical female, only this time they live five years longer (age 89).

• Claim at age 62: $394,308
• Claim at age 67: $459,096
• Claim at age 70: $491,568

When to start Social Security benefits is one of the most important financial decisions most people make during their lifetime. Every retired worker should understand how claiming age could impact their benefit income, but that doesn’t mean they must make the decision alone. Statistics show that retirees who develop a financial plan with an advisor have nearly twice the monthly income of retirees that lack a financial plan.