Social Security is an important source of retirement income. Unfortunately, if you claim Social Security too early, you can permanently reduce your benefits. But despite the fact retirees could face up to a 30% reduction in retirement benefits by claiming at the age of 62 instead of at their full retirement age, 62 remains a popular age to start receiving benefits.
Why do so many people claim Social Security at 62 and take the hit to their income that comes with doing so? Here are a few key reasons.
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1. 62 is the soonest benefits become available
The simplest explanation for why so many people claim Social Security at 62 is because they can't claim benefits any earlier. Many people count the days until they can get benefits because they need this money to leave the workforce or to survive comfortably if they've already been forced out of a job.
When health issues, family needs, or lack of job opportunities end your career early, there's a very good chance you won't have enough money to support yourself and your family. If you don't have enough and you can't work, it just makes sense to claim benefits the minute they become available.
2. It's hard to know if you'll break even if you wait to claim benefits
Another big reason for starting benefits early: It seems smarter to get benefits now than to hope you'll break even if you wait to claim higher benefits.
If you delay claiming Social Security benefits, you forgo years of income. Yes, the higher monthly benefits you get in the future will eventually make up for that -- but you'll typically have to live for more than a decade if you hope to break even. There's no guarantee of that.
Even if you do survive until your late 70s or early 80s, Social Security cost-of-living increases aren't keeping pace with rising costs seniors face, and the buying power of benefits is eroding. Plus, there's a concern that the Social Security trust fund could run short and benefits could be reduced, although that's unlikely.
With so much uncertainty about the future, it's no wonder many retirees decide to grab their benefits as soon as they can.
3. Retiring without Social Security is impossible for many seniors
Finally, another reason why so many people claim Social Security at 62 is that they decide they would rather get a smaller monthly benefit if doing so makes retiring early possible when it otherwise wouldn't be. Whether you're forced into early retirement or you simply want to leave work early, you may not be able to hand in your notice if you'd have to rely on savings alone.