The 1 Number That Might Make You Change Your Mind About When to Claim Social Security

One of the toughest financial decisions you might have to make in your lifetime is figuring out when to sign up for Social Security. Your filing age, coupled with your earnings history, will have a direct impact on the monthly benefit amount you’re entitled to.

A lot of people rush to claim Social Security at 62 because it’s the earliest age to sign up. But you may not realize that filing for benefits that early could cost you a huge amount of money in your lifetime.

The math doesn’t lie

If you file for Social Security at 62 instead of waiting for full retirement age (FRA), which is 67 if you were born in 1960 or later, your monthly checks will be reduced by about 30%.

That may not seem like a huge deal on a month to month basis. But the total impact of that reduction could be far more significant over the course of your lifetime.

Let’s say you’re eligible for $2,000 a month in Social Security at 67 but you file for benefits at 62, reducing your payments by $600. After one year, you’ll be down $7,200. 

But if you file for Social Security at 62 and live until age 90, you’ll reduce your benefits by $7,200 for many years.

By your 90th birthday, filing at 62 will result in a total of $470,400 in Social Security. But waiting until 67 would give you $552,000 in Social Security by age 90. That’s a difference of $81,600.

Here’s an even more eye-opening calculation. If you delay your Social Security claim past FRA, each year you wait until age 70 boosts your monthly benefits by 8%.

In our example, waiting until age 70 to claim Social Security would give you a total of $595,200 in benefits by age 90. Compared to the $470,400 in Social Security you’d get by filing at 62, you’re looking at a difference of $124,800.

Be careful when claiming benefits early

It can be very tempting to claim Social Security at 62 for the promise of immediate monthly checks. But before you do that, run the lifetime math.

Figure out what reduction an early claim will result in and compare it to filing at a later age. Then, map out different longevity scenarios to get a sense of how much you stand to gain or lose by filing at different ages.

One thing to keep in mind is that claiming Social Security early isn’t always a poor choice. It can be a bad decision if you expect to live a long life. If you don’t, that typically makes the case for an earlier filing.

You should also keep in mind that if you’re married, your Social Security filing age could have an impact on any survivor benefits your spouse may end up being entitled to. So when you do your math, factor those benefits in if you’re the higher earner in your household. Having actual numbers to look at could help you make a filing decision you don’t end up regretting.