3 Signs You Shouldn't Claim Social Security at 62

Key Points

• Claiming Social Security at age 62 can reduce your checks by up to 30%.
• It could also put you at risk of losing more money to the earnings test if you're still working.
• Those with short life expectancies and dependents may prefer not to claim Social Security at all.
• The $23,760 Social Security bonus most retirees completely overlook ›

Claiming Social Security at age 62 gives you the most checks, hands down. However, that doesn't mean it's always the best move for your finances. It can be the right decision for some people, but it's worth comparing multiple claiming ages before you decide when to sign up.

If any of the three situations below apply to you, you're probably better off waiting a little while rather than signing up as soon as you become eligible.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

1. You don't understand how your claiming age affects your checks

Claiming Social Security benefits at age 62 permanently reduces your monthly benefit. The Social Security Administration first calculates the amount you're entitled to at your full retirement age (FRA) -- 67 for most people today. Then, it adjusts it up or down based on your actual age.

Early claiming reduces your checks by 5/9 of 1% per month for up to 36 months, then by 5/12 of 1% per month thereafter. Those who apply as soon as they're eligible get 30% less than they would have if they'd waited until their FRA to sign up.

Benefits continue growing by 2/3 of 1% per month after you reach your FRA. This occurs until you qualify for your maximum benefit at 70. Most people would receive their largest lifetime benefit by waiting until 70 to sign up, though this isn't the case for those with shorter life expectancies. In that scenario, claiming at 62 could be a smart option.

2. You're still working, and you don't need the extra money right now

Claiming Social Security early and permanently shrinking your checks often doesn't make sense when you have enough other income to enable you to delay your application. Those who are still working might be especially reluctant to sign up at 62 because of the earnings test.

This is a little-known Social Security rule that withholds money from your checks if you earn more than a certain amount from your job during the year while under your FRA. The withheld funds come back to you as a one-time benefit boost at your FRA. But you'd still wind up with less this way than you'd get if you'd just delayed your application in the first place.

3. You have a short life expectancy and expect your family to be dependent on your survivor benefits

For single adults, a short life expectancy is often a reason to claim Social Security early, but for those with dependents, that could be the wrong move. Signing up early permanently reduces the survivor benefits your family will be eligible for after you've passed away.

If you expect your family to be highly dependent on these benefits, you might be better off forgoing Social Security retirement checks altogether. This will boost the amount your family is entitled to upon your death.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.