Retiring early at age 62 results in a permanent reduction in monthly Social Security benefits, with some recipients receiving up to 30% less than they would at full retirement age. The impact is calculated based on the number of months before full retirement age at which benefits begin.
- Benefits claimed at age 62 are reduced by up to 30% compared to full retirement age
- Reduction is calculated at 5/9 of 1% per month for up to 36 months before full retirement age
- A $2,500 PIA at full retirement age drops to $1,750 at age 62
- Cumulative lost benefits over 20 years can exceed $200,000
- Benefit reductions are permanent and not subject to recalculation
- Survivor and spousal benefits are also based on the reduced primary amount
Individuals who begin drawing Social Security benefits at age 62—four years before the full retirement age of 66—receive significantly lower monthly payments. For someone with a primary insurance amount (PIA) of $2,500 at full retirement age, the actual monthly benefit at 62 would be approximately $1,750, a reduction of 30%. The reduction is determined by a formula set by the Social Security Administration. For each month before full retirement age, benefits are reduced by 5/9 of 1% up to 36 months, and 5/12 of 1% for each additional month beyond that. This means claiming at age 62 results in a 30% permanent reduction for those with a full retirement age of 66. This decision affects not only the amount received each month but also long-term financial security. Over a 20-year retirement, the cumulative difference between claiming at 62 versus 66 can exceed $200,000 in lost benefits, assuming a 2.5% annual cost-of-living adjustment. The choice also impacts survivor benefits and spousal entitlements, which are based on the primary earner’s PIA. Financial planners often caution that early claiming may be suitable for individuals with health issues or limited work capacity, but for those in good health, waiting until full retirement age or beyond can substantially improve lifetime income. The decision is irreversible, and benefit amounts are not recalculated based on later earnings or life circumstances.