3 Reasons Not to Claim Social Security at 62

You can claim your Social Security retirement benefits once you turn 62, and the Center for Retirement Research reports that this is the most popular age to start receiving payments.

But just because you can start your benefits at 62 does not mean you should start your benefits then. While it's tempting to begin collecting this income ASAP, there are major downsides. In fact, here are three big reasons that you could really come to regret such an early claim.

Image source: Getty Images.

1. You'll shrink your benefit significantly

Claiming Social Security at 62 has one obvious downside that should become apparent as soon as you look at your benefit amount. Because a claim at 62 is well before your full retirement age (67 if you were born in 1960 or later), you'll face five years of early filing penalties.

These penalties reduce your primary insurance amount (your standard benefit based on average wages) by five-ninths of 1% for the first 36 months and by five-twelfths of 1% for any additional month you claim early. The reduction amounts to a 30% cut in monthly benefits for a claim at 62 versus 67.

How much does this actually matter? A benefit that would have been $2,000 per month at 67 is reduced to just $1,400 per month at 62. That's $600 per month you lose because you decided not to wait.

2. You'll reduce a valuable source of inflation-adjusted income

When you claim your Social Security benefits at 62, you aren't just affecting your finances for the first year. Social Security benefits are protected against the impact of inflation. You receive a Social Security cost-of-living adjustment (COLA) in most years when the Consumer Price Index (CPI) shows increasing prices.

Unfortunately, because your COLA is awarded as a percentage, you will see smaller COLAs for the rest of your retirement if you start with a smaller check. To be clear, you will get the same percentage increase. But a 3% increase from $2,000 is an extra $60 per month, while a 3% increase from $1,400 is just $42 per month.

Seniors often do not have many (or any) other sources of income that provide guaranteed protection against inflation. Your savings and investments could lose buying power when prices surge. Shrinking a key source of income designed to hold its value and help support you for the rest of your life is a move you could really end up regretting.

3. You could reduce your lifetime Social Security benefits

Finally, claiming at 62 also reduces your odds of getting the most lifetime benefits.

Of course, you start getting payments sooner, and it is nice to have the money coming in. But multiple studies have shown that a later claim increases the chances of receiving more lifetime income, because most people live long enough that the higher checks earned from a delayed claim more than make up for any income missed.

You should consider these serious downsides of claiming Social Security at 62 as you plan for retirement before you move forward with a decision that may negatively affect your finances for the rest of your life.

The Motley Fool has a disclosure policy.