Early Retirement at 62: Understanding Reductions, Real Costs, and Long-Term Tradeoffs

1. Why age 62 is “early” in Social Security terms

Social Security uses the idea of a Full Retirement Age (FRA) — sometimes called “normal retirement age” — to decide whether your benefit is “full” or reduced. For people born in 1955–1960, FRA is between 66 and 67. For everyone born in 1960 or later, FRA is 67. Filing before that age is considered “early,” so the system reduces your monthly check to keep the lifetime cost of the program stable.

In other words, Social Security is neutral on paper: if you claim earlier, you get more months but at a smaller amount; if you claim later, you get fewer months but at a higher amount. Age 62 is the earliest “normal” claim (disability and survivor cases are different), so it triggers the maximum early retirement reduction.

2. How the reduction at 62 is calculated

The reduction is expressed as a percentage of the benefit you would get at your FRA. For a worker whose FRA is 67 (typical for younger workers), claiming at 62 means claiming 60 months early. Social Security reduces your benefit:

• by 5/9 of 1% for each of the first 36 months you claim early; and
• by 5/12 of 1% for each additional month beyond 36.

Let’s walk through the math in plain language.

Step 1 – first 36 months: 36 × (5/9 of 1%) = 36 × 0.555…% ≈ 20% reduction.

Step 2 – remaining 24 months: 24 × (5/12 of 1%) = 24 × 0.416…% ≈ 10% reduction.

Total reduction: 20% + 10% = 30% reduction.

This is why you often hear: “If your FRA is 67 and you file at 62, your benefit is about 70% of the full benefit.” That 70% becomes permanent for as long as you receive retirement benefits.

Example: suppose your Primary Insurance Amount (PIA) — the benefit at FRA — is $2,000. If your FRA is 67 and you claim at 62, a 30% reduction means your monthly benefit becomes $1,400. Over 12 months, that’s a difference of $7,200 per year. Over a 20-year retirement, the difference could be well over $100,000 in total lifetime benefits, depending on cost-of-living adjustments (COLAs).

3. The core tradeoff: money now vs. money later

Claiming at 62 gives you cash flow right away. That’s powerful if you’re leaving a job, supporting family, or need to stop working for health reasons. But you “lock in” a lower starting point forever. Later COLAs will apply to the smaller amount.

This creates a classic retirement planning question: What is more valuable to you — a lower benefit for more years, or a higher benefit for fewer years? Economists often describe this using breakeven analysis: at around age 78–82 (depending on assumptions, marital status, discount rates, and COLAs), the person who waited to claim may have received more in total than the person who claimed at 62.

So, if you expect to live a long life, delaying often wins. If you need the income now or your health outlook is poor, claiming at 62 can be rational even though it is “less” on paper.

4. Impact on spousal and survivor benefits

Where many people underestimate the cost of claiming at 62 is in its effect on a spouse. Your claiming age can influence what your husband or wife may later access:

• Spousal benefit while you are both alive: generally up to 50% of your PIA if the spouse claims at their own FRA. This part is based on your PIA, not on what you actually receive. So your own early claim does not slash your spouse’s maximum spousal benefit the same way it slashes your retirement benefit.
• Survivor benefit: this is more sensitive. If you die first, your surviving spouse can often receive the amount you were receiving. If you locked in a 30% reduction by claiming at 62, you may also be passing a smaller check to your survivor.

Therefore, if you are the higher earner in a couple, claiming early can be a two-person decision: you are not just choosing your benefit; you may be choosing your spouse’s future benefit.

5. Earning while receiving early benefits: the earnings test

One of the most overlooked tradeoffs of claiming at 62 is the Retirement Earnings Test. If you claim before your FRA and you keep working, Social Security will check how much you earn from work (wages or self-employment). If you earn above the annual earnings limit (which is indexed and changes every year), the SSA will withhold part of your benefit.

The standard rule is: before FRA, SSA withholds $1 in benefits for every $2 you earn above the annual limit. In the calendar year you reach FRA, the formula gets easier ($1 for every $3 over a higher limit). After you actually reach FRA, the test disappears — you can earn as much as you want and collect 100% of your benefit.

This means: if your plan is “I will claim at 62 but also keep a good-paying job,” you may not actually see the monthly checks you expected. The money is not necessarily lost forever — SSA recomputes your benefit at FRA to account for months withheld — but it reduces the short-term cash flow advantage of claiming early.

6. Medicare is not available at 62

Another practical piece: claiming Social Security at 62 does not give you Medicare. Medicare eligibility is still, in most cases, at age 65. If you leave work and lose employer health coverage at 62, you will need to find health insurance on the marketplace or another source for three years, which can be expensive. For some people, the cost of private insurance from 62 to 65 eats up a big share of the Social Security benefit they claimed early.

7. Inflation and COLAs on a lower base

Social Security includes automatic Cost-of-Living Adjustments (COLAs) to protect beneficiaries from inflation. But COLAs are percentage increases. A 3% COLA on $1,400 is less money than a 3% COLA on $2,000. Over 20–25 years of retirement, that difference compounds. So, early claiming means you are choosing a lower base to which all future COLAs will apply.

8. Taxes and other income interactions

Social Security benefits can become taxable depending on your “combined income” (adjusted gross income + nontaxable interest + half your Social Security). Claiming at 62 while you still have wages, consulting income or IRA withdrawals could pull some portion of your benefit into taxation sooner than if you had waited. This does not mean you should always delay, but it means early claiming interacts with the rest of your retirement income picture.

9. When early claiming at 62 can make sense

Despite the large reduction, there are solid reasons to claim at 62:

• Health or life expectancy concerns: if your family history or your own condition suggests you may not reach average life expectancy, taking benefits sooner often delivers more value.
• Job loss or forced retirement: if you simply need income and do not want to deplete savings, Social Security at 62 is a guaranteed, inflation-adjusted source.
• Lower-earning spouse first: in some couples, the lower earner claims early for cash flow while the higher earner waits to 67 or 70 to maximize the survivor benefit.
• Bridge strategy: some households deliberately claim at 62 to “bridge” to 65 (Medicare) or to a pension that starts later.

In all of these cases, the reduction is not a mistake — it is the cost of getting money when it is most useful.

10. When delaying is usually better

On the other hand, waiting past 62 — even just to 63, 64 or 65 — is often better when:

• You are the higher earner and want to protect your spouse with a larger survivor benefit.
• You plan to keep working and will exceed the earnings test limits.
• You have enough savings to cover living costs without Social Security for a few more years.
• You expect to live a long time — especially for women, who live longer on average, delaying can deliver more total dollars.
• You want the largest inflation-adjusted income floor possible in very old age.

Remember also that from FRA up to age 70, benefits grow via delayed retirement credits (about 8% per year). That is separate from the early-claiming reduction but is part of the same long-term optimization question.

11. A structured view of the tradeoffs

12. Conclusion

Claiming Social Security retirement at 62 is not “wrong.” It is a financial decision that swaps a permanent reduction of about 25–30% for the right to start receiving income up to five years earlier than your Full Retirement Age. For retirees who need cash flow, who do not plan to work much, or whose health outlook is uncertain, that tradeoff is reasonable and even smart. But for workers who can afford to wait, who expect a long retirement, or who want to protect a spouse with the highest possible benefit, filing at 62 is often too costly. The key is to model not just this year’s check, but 20–30 years of retirement income, including taxes, earnings test, Medicare timing and survivor scenarios. Only then does the real price of “early” — and the real value of waiting — become clear.

Technical / Legal Base (in English)

Early retirement at 62 and the corresponding reduction of U.S. Social Security retirement benefits are governed by federal statutes and detailed Social Security Administration (SSA) regulations and program rules. Below are the core authorities and reference materials:

• 1. Social Security Act (42 U.S.C. § 401 et seq.). This is the primary federal statute creating Old-Age, Survivors, and Disability Insurance (OASDI). It authorizes retirement benefits, establishes eligibility, and delegates rulemaking to the SSA.
• 2. 42 U.S.C. § 402(a) (Old-age insurance benefits). Sets out general entitlement to retirement benefits once a worker is fully insured and has reached the applicable age.
• 3. 42 U.S.C. § 415 (Computation of primary insurance amount – PIA). Describes how a worker’s Primary Insurance Amount is calculated based on Average Indexed Monthly Earnings (AIME). The percentage formulas here are the starting point for all later reductions.
• 4. 42 U.S.C. § 416(l) and related provisions on “retirement age” / full retirement age (FRA). These sections define what “retirement age” means and how it increases for later birth cohorts (up to age 67 for those born in 1960 or later).
• 5. 20 C.F.R. Part 404 — Subpart D (Old-Age and Disability Benefits). SSA’s regulations explaining entitlement, the effect of filing before full retirement age, and the month-by-month reduction rules.
• 6. 20 C.F.R. § 404.310–404.313. Explain when you become entitled to old-age benefits, the earliest month of entitlement (normally the month you reach 62), and conditions for payment.
• 7. 20 C.F.R. § 404.410–404.413. Cover reduced benefits for an insured worker who elects to receive benefits before FRA. These sections are the regulatory basis for the actuarial reduction applied to early retirees.
• 8. SSA Program Operations Manual System (POMS), e.g. GN 00204, RS 00615, RS 00605. POMS is SSA’s internal guidance to its staff. It explains, in operational language, how to apply the reduction factors (5/9 of 1% for the first 36 months; 5/12 of 1% for additional months) and how to round the final benefit.
• 9. SSA Publication “Retirement Benefits” (SSA Pub. No. 05-10035) and “When to Start Receiving Retirement Benefits” (SSA Pub. No. 05-10147). These official brochures explain to the public the effect of claiming at 62, give current-year examples, and include tables showing percentages by claiming age.
• 10. Earnings Test authority — 42 U.S.C. § 403 and 20 C.F.R. § 404.415. These provisions authorize the Retirement Earnings Test, under which SSA temporarily withholds benefits for beneficiaries under FRA who earn above the annual exempt amount.
• 11. Survivor and spousal benefit rules — 42 U.S.C. §§ 402(b), 402(c), 402(e), 402(f) and 20 C.F.R. §§ 404.330–404.347. Relevant because an early claim by the higher earner can affect the amount later payable to a spouse or surviving spouse.
• 12. Medicare eligibility — 42 U.S.C. § 1395c and SSA’s linked guidance. Important operationally because retirement at 62 does not bring Medicare; most workers only qualify at 65.