I wrote recently that I was 62 and old enough to claim Social Security, but my retirement planning didn't include claiming Social Security anytime soon for a variety of reasons. A number of people have responded that they thought my approach was wrong, and they intended to take their Social Security as soon as possible, mostly because they fear that they might not live long enough to get their fair share.
Sourdough2224 put that retirement fear this way: "The math says that if you retire at 66, you have to live until you are at least 80 to break even with what you gave up by not retiring at 62. That's just counting the actual dollars given up and not accounting for any savings you may accumulate and the interest thereon. Average life expectancy of the American male is 76 to 77 years, although the Internal Revenue Service will tell you it is 84 to 85 (which is a farce). So, the question is, as Clint Eastwood would say: 'You feeling lucky?' I don't bet on luck. I began withdrawing at 62 and haven't regretted it a moment."
MyMothersKeeper countered that line of reasoning, saying, "My mother and stepdad both filed for Social Security at 62 even though they were both still working because they wanted a little extra income. Stepdad died last year at 79 and Mom is 76, going strong and will likely see at least 85. She loves living by herself and hates the thought of having to move in with us, but she is burning through the money she got from selling the house and will eventually have to give up her solo living. Another $200 a month right now would kick that can down the road at least five years. That's the flip side of filing early; lack of income in your later years limits your options."
My advice is to do your own math. If you take Social Security at 62, you'll lose at least 25 percent of what you'd get at 66, full retirement age. Every year that you delay past 66, you get an additional 8 percent until you reach age 70, when there is no point in delaying further. For example, based on AARP's easy-to-use Social Security benefit estimator, if you earned an inflation-adjusted average salary of $35,000 for 35 years and you turn 62 this year, you would be entitled to $1,083 a month. If you wait until age 66, you'll get $1,445 a month -- $362 more. If you can delay claiming until age 70, your monthly check will be $1,907, a whopping $824 a month more than you would have gotten at age 62.
By delaying, you'll also receive a cost-of-living adjustment every year there is one. Generally, that's every year. The cost-of-living adjustment is added to your base. Historically, that adds 1.5 to 3 percentage points every year -- another $20 to $40 a month in the example above -- and it's cumulative. By the time you turn 70, that could easily be another 12 percent to 25 percent added to your check. That's real money.
Yes, Sourdough2224 is correct. You could take Social Security at 62 and save it, and you'd get interest, but in today's low-interest environment, there are few investments that would offer you a guaranteed 8 percent a year, plus a COLA.
Social Security is a terrific deal, and rushing to take it early can be a big mistake.