Millions of Americans rely on Social Security benefits to cover their expenses. Understanding how much you can expect to receive each month is crucial for retirement planning. This guide focuses on what you can expect if you decide to start receiving Social Security at age 62.
In 2024, nearly 68 million people will receive Social Security benefits monthly. Approximately 75% of these beneficiaries are retired workers, who received an average monthly payment of $1,918 as of June. However, this amount varies based on your work history, earnings, and the age at which you begin collecting benefits.
Use a Social Security calculator to estimate your monthly benefit.
Data indicates that many individuals opt to claim benefits before reaching their full retirement age, which subsequently reduces their monthly payment.
For those who begin collecting retirement benefits at the earliest possible age of 62, their monthly payment is permanently reduced. If your full retirement age is 67, this reduction amounts to roughly 30%. For example, a $1,000 benefit would be reduced to $700.
Understanding your Social Security benefits is essential for retirement planning.
Conversely, delaying your Social Security benefits results in an 8% increase each year until you reach age 70. Therefore, waiting until age 70 can allow a retired worker to earn up to 124% of their full benefit. Research suggests that delaying is often the most financially advantageous strategy, if feasible.
Here’s a breakdown of the maximum possible Social Security retirement benefit in 2024 based on retirement age:
- Retired at the earliest retirement age (62): $2,710 per month
- Retired at full retirement age: $3,822 per month
- Retired at age 70: $4,873 per month
Factors Influencing Your Social Security Benefit at 62
Several factors determine the amount you’ll receive from Social Security at age 62:
- Earnings History: Social Security benefits are based on your lifetime earnings. The Social Security Administration (SSA) considers your 35 highest-earning years when calculating your benefit.
- Full Retirement Age (FRA): Your FRA is the age at which you’re entitled to receive 100% of your Social Security benefit. This age is determined by your birth year. For those born between 1943 and 1954, the FRA is 66. For those born between 1955 and 1959, the FRA gradually increases to 67. For those born in 1960 or later, the FRA is 67.
- Age at Which You Claim Benefits: Claiming benefits before your FRA results in a permanent reduction in your monthly payment. Claiming at age 62 means receiving a significantly lower amount compared to waiting until your FRA or age 70.
The Impact of Early Retirement on Social Security Benefits
Claiming Social Security at 62 has both advantages and disadvantages. While it provides immediate income, it also leads to a reduced monthly benefit for the rest of your life. Before deciding, consider these points:
- Reduced Benefit: As mentioned earlier, claiming at 62 results in a permanent reduction. This reduction can be substantial, especially if your FRA is 67.
- Longer Benefit Period: Although the monthly payment is lower, you’ll receive benefits for a longer period if you start at 62 compared to waiting.
- Impact on Spousal Benefits: If your spouse is eligible for Social Security benefits based on your record, your decision to claim early can also affect their potential benefits.
- Financial Needs: Evaluate your financial situation. If you need the income immediately, claiming at 62 might be necessary. However, if you can afford to wait, delaying can lead to a higher lifetime benefit.
Careful retirement planning is essential to ensure financial security.
How to Estimate Your Social Security Benefit at 62
The Social Security Administration (SSA) provides several tools to help you estimate your future benefits:
- mySocialSecurity Account: Create a mySocialSecurity account on the SSA website to view your earnings record and estimate your potential benefits at different ages.
- Social Security Calculators: Use the SSA’s online calculators to estimate your benefits based on different scenarios. These calculators take into account your earnings history and retirement age.
- Financial Advisor: Consult a financial advisor for personalized advice. They can help you assess your financial situation and develop a retirement plan that considers your Social Security benefits.
The Future of Social Security
Social Security is primarily funded through a payroll tax, with employees and employers each contributing 6.2% of wages. An additional 4% of the program’s funds come from taxing Social Security benefits.
These revenues are credited to two federal trust funds, which are used to pay current and future Social Security benefits.
However, the aging population poses a challenge. The trust funds are projected to be depleted in roughly a decade, potentially leading to benefit cuts if Congress doesn’t take action.
The last major Social Security reform occurred in 1983, when the federal government gradually raised the eligibility age from 65 to 67. Similar action may be necessary to ensure the program’s long-term sustainability.
Social Security benefits represent approximately 30% of the income for people over the age of 65, and the number of Americans in that age group is projected to increase significantly in the coming decades.
Making an Informed Decision
Deciding when to claim Social Security benefits is a personal decision that depends on individual circumstances. Understanding the factors that influence your benefit amount and considering the pros and cons of claiming early are crucial steps in retirement planning. By using the resources available from the Social Security Administration and seeking professional advice, you can make an informed decision that aligns with your financial goals. Starting benefits at 62 might provide earlier access to funds, but comes with a reduced monthly payment that should be carefully considered.
