Claiming Social Security at 62? 3 Reasons You Might Regret It.

You may not think of age 62 as such a major milestone in the context of retirement. Age 65 tends to get a lot more attention.

But age 62 is significant in that it's the earliest age to sign up for Social Security. Once you reach 62, you can file for benefits at any point in time.

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But that doesn't mean claiming Social Security at 62 is a smart idea. While it does tend to be a popular choice, here are a few reasons you might regret it.

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1. Your monthly benefits will be reduced for life

Your monthly Social Security benefits in retirement are calculated based on your earnings history -- specifically, your 35 highest-paid years of income. But your filing age also determines how much money Social Security pays you each month.

You can claim your monthly benefits without a reduction once you reach full retirement age, which is 67 for anyone born in 1960 or later. If you file for Social Security at 62, you'll slash your monthly payments for life. And that could hurt you if you're not entering retirement with a lot of money saved.

The Federal Reserve puts median retirement savings for Americans ages 65 to 75 at just $200,000 as of 2022, the most recent year for which data is available. If you have a similar nest egg, you might need as much Social Security as you can get, which would make reducing your monthly benefits with an early claim a poor choice.

2. You might end up with less lifetime income

Filing for Social Security at 62 may not just result in less monthly income. It could also lead to less lifetime income.

Granted, if you end up passing away at a fairly young age, then an early filing could be your ticket to a larger lifetime Social Security payout. But if you live a longer life, you can expect to lose out financially by taking benefits as early as possible. Given that you've been paying into Social Security your entire career, is that really what you want?

3. You'll risk having benefits withheld if you're still working

Some people file for Social Security even though they're still working, which is allowed. If you do so starting at full retirement age, you won't risk having any benefits withheld. But if you're younger, you'll be subject to an earnings-test limit. And exceeding it could mean having some of your Social Security dollars withheld.

In 2025, you'll lose $1 for every $2 you earn over $23,400 based on the current earnings-test limit. The exception is if you'll be reaching full retirement age this year but haven't gotten there yet. In that case, you'll lose $1 for every $3 you earn over $62,160.

To be clear, withheld Social Security benefits aren't the same as forfeited benefits. Funds that are withheld for exceeding the earnings-test limit will be given back to you in the form of larger benefits once full retirement age arrives.

But remember, claiming Social Security at 62 results in smaller monthly payments on a permanent basis. If you're going to sign yourself up for less monthly income, you might as well get all of it. But if you work and earn too much money, that may not happen.

For some people, claiming Social Security at 62 is a smart bet. But make sure you're one of those people before signing up for benefits as early as possible. And if you're on the fence, consider these drawbacks very carefully before making your decision.

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