Should You Start Taking Your Social Security Benefits At Age 62 or Full Retirement Age?

Social Security benefitsRetirees are eligible to accept Social Security withdrawals as early as age 62 instead of having to wait until the full retirement age of 67, but you will receive a reduced benefit every month. So, should you accept the reduced befit that goes along with an early retirement? There are a lot of factors that have to be considered in your own personal decision to take the Social Security payments early or delay them if possible.

Every employee in America pays 6.2% of his or her salary into the Social Security system up to a certain cap of your salary. In order to receive benefits, a person must have worked for the equivalent of ten years while paying into the system. The full retirement age used to be 65 years of age, but with the federal government’s struggling monetary shortfalls, the current full retirement age is 67 years-old. As mentioned earlier, you can withdraw a monthly pension from Social Security starting at age 62, but you will receive a reduction your monthly benefits. Your date of birth determines the percentage amount that you will receive if you accept the early benefit; this percentage rises the closer you get to the full retirement age before beginning withdrawals. So, when should you start taking Social Security payments? Obviously, the longer you wait, the higher the monthly paycheck will be. But, this also delays retirement. Consider these factors when making your decision:

What Is Your Risk Tolerance?

If you have a low risk tolerance, you might want to consider waiting to accept full payment when you reach the full age of retirement. Waiting will help to ensure that you will have a far less chance of running out of money in your Golden Years of retirement. Retirees with a higher risk tolerance can focus on a portfolio more heavily weighted in stocks rather than bonds and Social Security payments. This portfolio will enable them to make up for the lower Social Security payments if they are successful in their portfolio. Moreover, their tolerance will allow them to stomach the stock market’s up and down swings that will inevitably take place.

How Long Do You Think You Are Going To Live?

Thinking about how long you plan to live may seem like a very morbid question or thought to consider, but people who live longer may come out ahead by delaying their Social Security benefits until they reach the standard retirement age. A person who accepts a reduced benefit every month by choosing the earlier payout will continue to lose money over the course of a long retirement. People with a history of relatives living a longer life need to strongly consider waiting and receiving the full benefits. For example, a person who was born in 1948 will turn 62 this year. Taking Social Security retirement benefits at age 62 instead of that “group’s” full retirement age of 66 years-old would result in a reduction of 25% of payouts. If this person lived a full life expectancy of 77 years-old, the average benefit from $1,171 would be reduced to $878 or a loss of $292 per month. That would equal over $52,000 during your retirement years.

How Much Do You Pay In Taxes?

In most cases, except for those with the least amount of income, Social Security benefits are taxable income. Thus, you must consider the amount of taxes you currently pay and the amount that you will pay in the future if you begin receiving payments. Will your Social Security payments put you in a higher tax bracket? Taxes are an extremely important factor that can have huge financial repercussions, so make sure not to disregard this point.

Have You Saved Enough For Retirement?

You need to evaluate your savings to determine if you have saved enough to wait until the full retirement age. Ideally, you have built up an adequate retirement portfolio and have invested as much money as possible into your retirement accounts during your working years. By doing so, this will allow you to prolong the amount of time before you need to start drawing Social Security benefits. Unfortunately, for one reason or another, there are many of us who simply will not have the necessary funds built up. Those individuals who have not saved enough for retirement may find themselves backed into a corner forcing them to take the early payment. They may need the monthly income stream as soon as it becomes available to them to fund a shortfall in lost income due to retirement or perhaps loss of job.

Final Words

Studies show that many Americans favor receiving early Social Security payments in favor of a reduced benefit over their retirement lifetime. The allure and instant gratification of retirement and getting your money several years before the full retirement age is partially to blame. But for others, it’s simply the urgent need for money the forces them to access these funds early. Whatever the case is, this choice is not one to be taken lightly. You should weigh all of the factors before you make your decision. If at all possible, you should try and wait to accept payments to maximize the amount of money you will get over the long term.

Have any of you been faced with this decision in the past? What are your thoughts on the best route to take?

(photo credit: Shutterstock)

  • Paul Petillo

    There is another thing to consider Hank. Drawing SS is taxable and drawing it early is a tough choice. Unless of course, you don’t need it. If you have retired and are able to draw enough to live on and work just enough so as not to force any reduction in SS, saving it until full retirement and then paying it back in full gets you the increased benefit. You will have to rely on a Roth to get you through and probably some part-time work. You will have to pay the taxes on the benefit but I believe that there are some tax considerations for making the repayment – and if you are drawing from a Roth (already taxed) and do not earn more than $14,160, you are in one of the lowest brackets.

    Either way, contact your tax person or even better, earn more in your last year of work which will adjust your benefit higher. Having it is comfort enough for some people even if they can make predictions about how long they live.

  • Roy L.

    The real reason that people start taking out at 62 is simply because people have lost all faith in the government to have money in there until they die. You have to start taking out what you can. I can’t retire for 22 years. I fully believe, like a lot of other people, that one of two things will happen.
    1) There will be no money, or the benefits will be so small as not to really matter.
    2) It will be given out on a needs basis. If you save enough, tough.
    It is interesting to note that while Welfare recipients get a COLA by law, Social Security recipients, who paid into this their whole life, have not received a COLA for two years now. That’s just the start of what is to come.

    • Hank Coleman


      I think that the larger reason why people take retirement benefits at age 62 is because they have most likely not done the proper planning and saving in order to fund their retirement fully. Taking an earlier reduced benefit is better than no benefit at all for four or more years if you need that money thanks to poor planning and savings habits throughout your working years.

      • renee

        Hank I agree with you but I also have some other reasons why I don’t have a great savings. First I was a mother of 3 stay at home mom. Got a divorce and worked for $3.00 an hour in the 80’s. Then got a better job at $4.00 1983 an hour, ex ran and would not pay child support. Was up to $6.25 in 1996 and was able to get a 401K at work they matched 5%. I have save 52,000.00 now I fell at work was on worker comp after to 2 surgeries. Have been on light duty since 2010 it has been ok I am not a lazy person. Did not want a buy out it was offered. Not company was sold and changed my job. I am having a hard time doing it might end up on workers comp again and forced to take a early retirement at a 62 which I will be in august. I did not want this have been trying to hang on but its hurting me and its been a month. I did not want to take it early but it looks like I will have too. Renee

  • Peter

    I think you left out the most important part of the math. Under your senario this person would have collected $42144 by tthe time they would be 66. It would take a little over 12 years to make up the difference between collecting early or waiting for full retirement. This person would have to get passed his/her 78th birthday just to make up for waiting. Plus this person may have properly invested the $42k for 16 years. What could that $42k be worth at age 78? By-the-way I collected early, but no, I did not invest it properly :( It appears that if I had waited I would have to pay more tax starting in 2011 than I paid in the first 4 years.

    Unless fed gov fixes tax policy it is very difficult to make long term tax decisions. Seems there is a new tax surprise monthly. While I’m on taxes, have you heard about proposal to nationalize 401k and IRAs?

    • Hank Coleman


      $42,000 invested from the age of 62 until the age of 78 earning an average of 8% per year annual return would be worth approximately $144,000 at age 78.

      And, no I have not seen the proposal of nationalizing 401ks and IRAs, but i think that the likelihood of such a measure would meet with so much political fallout that no politician would consider voting for it no matter how much the government could make off of the proposal. Rest assured, I think that our 401k’s and IRAs are perfectly safe.

      • Peter

        Actually dems took a look at nationalizing retirement accounts/plans in the early Clinton years. The ’94 gop take over of the house put the brakes on it.

        Now check this:
        “In fact, Obama’s Treasury and Labor Departments just held outrageous, executive branch hearings on nationalization of retirement accounts, and they are actively looking for the opportunity to ram this asset grab through.
        Your nest egg is in their cross-hairs; you know, to “protect you” from losing your own money.
        Congressional heavyweights such as Rep. George Miller (D-CA) have already held hearings on “merging” 401(k)s, IRAs, and other tax-advantaged private savings programs into the failed Social Security program.”
        It’s not only for Social Security, it’s for all the unions’ failed retirement systems too.

        The safety of privately owned retirement programs will depend on the outcome of November 2nd elections.

      • patsaison

        Where are you going to invest and earn a SECURE 8% these days?

  • Peter

    Another consideration as to when to collect ss is based on one’s high 30. Not only do you need 40 good quarters (10 years) to be eligible, the amount you receive is based on your best 30 years. So continuing to work during higher paying years will create a larger ss check no matter when you start. Also, remember that the high 30 is based on “earned income” not dividends, capital gains, allowances and etc.

    • CValner

      “So continuing to work during higher paying years will create a larger ss check no matter when you start.”
      True if any of the years later worked is included in one’s high 30. But, if you were laid off from a good paying job in your late 50’s or early 60’s and miraculously managed to get another but much lower-paying job, your base SS benefit amount wouldn’t change. Only the delayed credits of waiting longer to draw SS would apply. However, with even a lower paying job a person would likely avoid or decrease having to spend down savings, might be able to save more, and likely be able to delay taking SS til full age or later. Or, if they have sufficient income & assets (spouse/partner’s job, passive income, pension, investments) they could use the lower non-working income years prior to full SS age to do Roth rollovers and still avoid taking early SS.

  • Hank Coleman

    Great comments everyone. I really appreciate you all adding to the discussion with some of the finer points of this complicated topic.

  • Bet

    Relating to Peter’s comment. What if you are already retired from your job, and are now eligible for early SS benefits? The benefit would go up each year I wait, but the wages the figure is based on will not increase. Also, if you took early benefit, you could leave other investments to accrue interest. However, the SS benefit increases about 6% a year. Tough decision, maybe split the difference and collect at 64!

  • Commenter

    All I have to say is neither tomorrow is ever guarantied, nor living to 78. I hope to live this long (and longer). The quality of the life you live to get to 78 is just as important as getting there with enough money, and maybe spending money now vs. saving for later may be important to someone.

    • Peter

      Commenter has a good point on the quality of life…. other than medical expenses I think that when one approaches 80 they are much less active and just don’t spend as much. I have my dad’s old car now. He bought it when he was 76… he passed away at 89. The car only had 60k miles on it.

  • Connie

    Hank, I’m a 62 y/o woman divorced (married for 17 years). I was laid off in June 2010 and so far have not found another job. I did not plan my retirement as well as I should have and have used or lost all my savings in part to the last 2 big economic upheavals. The job market for our age group is terrible insofar as we are called “the unemployable bunch.” At present I have a pension and disability from my old company. What are your thoughts on applying for early SS benefits?

  • Wings2try

    With no savings at all, being laid off suddenly from a long time job, and the true need for money, if I retire at 63 and somehow later down the line am able to get a great job (at my age highly unlikely) can I UN-RETIRE and if I do must I pay back what has been paid to me during this time?

  • Sue

    I retired at 62 with a good pension & Social Security. At age 68, I have returned to work. I pay for my Medicare Part B from my Social Security. I received my first paycheck & am still getting Social Security & Medicare out of my paycheck. Can you explain why