The $150,000 Social Security Mistake Nobody Does the Math On
Quick Read Claiming Social Security at 62 instead of 67 permanently cuts your monthly benefit by 30%, costing the average retiree roughly $150,000 over 20 years. Because cost-of-living adjustments are percentage-based, starting with a smaller benefit compounds the loss further every year you collect. Claiming early makes sense if you have poor health, a short…
Claiming Social Security at 62 instead of 67 permanently cuts your monthly benefit by 30%, costing the average retiree roughly $150,000 over 20 years.
Because cost-of-living adjustments are percentage-based, starting with a smaller benefit compounds the loss further every year you collect.
Claiming early makes sense if you have poor health, a short life expectancy, or urgent income needs like job loss in your 60s.
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One of the most critical retirement planning decisions you’ll have to make is figuring out when to claim Social security. While you’re allowed to start collecting benefits as early as age 62, waiting until full retirement age (FRA) can increase your monthly checks substantially.
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If you were born in 1960 or later, your FRA is 67. Filing for benefits at 62 results in a roughly 30% reduction compared to waiting until 67.
You may be willing to take the hit on your Social Security benefits on a monthly basis. But if you file at 62, you may not realize just how much income you could end up leaving on the table in the course of your lifetime.
How claiming Social Security at 62 could cost you $150,000
Everyone’s Social Security benefit is different. Yours is based on your personal wage history coupled with your filing age.
The average retired worker today, however, receives a monthly Social Security benefit of about $2,084. Claiming that same benefit at 62 results in a $625 monthly reduction.
Losing out on $625 a month means getting $7,500 less in Social Security per year. Over a 20-year retirement, that’s approximately $150,000 in benefits you’re potentially giving up.
And that’s before accounting for annual cost-of-living adjustments. Because those adjustments are calculated as a percentage of your benefit, starting with a larger monthly check means larger dollar increases over time as well.
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That’s why claiming Social Security early is often much more expensive than people realize. It isn’t simply about accepting a smaller monthly payment initially. It’s about permanently reducing one of your most reliable sources of retirement income.
Waiting isn’t always the right answer
Even with such a large difference in lifetime income, waiting until age 67 doesn’t automatically make sense for everyone. If you’re dealing with serious health issues or have reason to believe your life expectancy will be shorter than average, claiming Social Security earlier could allow you to receive more total benefits over your lifetime.
Likewise, if you’ve been laid off in your early 60s and have little income coming in, Social Security may provide the financial support you need while you look for work or transition into retirement. If claiming benefits helps you avoid taking on high-interest debt, it may be the best available option.
On the other hand, waiting can be especially valuable if you’re in good health and expect to enjoy a long retirement. The longer you live, the more years you’ll collect those larger monthly checks, making it easier to come out ahead.
Waiting could also make sense if you don’t have much savings and expect Social Security to provide a large portion of your retirement income. Locking in a higher monthly benefit could make it easier to cover your essential expenses for decades.
Make your decision carefully
All told, there’s no single “best” claiming age for Social Security. The best choice for you depends on your health, your finances, your employment situation, and your retirement goals.
But before you file at 62 simply because it’s the first opportunity to collect benefits, take the time to understand the long-term cost. A decision that puts money in your pocket today could reduce your retirement income by roughly $150,000 over the next two decades.
If you have the flexibility to wait until age 67, those larger monthly checks could provide greater financial stability for the rest of your retirement.
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