5 really bad consequences of filing for Social Security at 62 — are you making the wrong move?

5 really bad consequences of filing for Social Security at 62 — are you making the wrong move?

Vawn Himmelsbach

9 min read

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Are you planning to start collecting your Social Security retirement benefits at 62?

Perhaps you're tired of your job and want to retire. Or maybe you're in less-than-ideal health or having a hard time making ends meet and want to start collecting benefits while you continue working.

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There are plenty of reasons why it may make sense to claim your benefit early. But claiming early also has its downsides, which you'll need to weigh carefully.

From a lower monthly benefit to a gap in healthcare coverage, here are a few consequences of taking your Social Security retirement benefit early.

1. Your monthly benefit will be lower for the rest of your life

To receive 100% of the monthly Social Security benefit you're entitled to, you'll have to wait until you reach full retirement age (FRA) as defined by the Social Security Administration (SSA). Your FRA is based on your birth date, so those currently eligible to collect at age 62 — or those who will be in the future — have an FRA of 67.

If you take your benefits before your FRA, your benefit amount will be permanently reduced each month before age 67, up to a maximum of 30% at age 62. That means if you're entitled to a monthly benefit of $1,000 at 67, your monthly benefit will only be $700 at 62.

Accepting reduced benefits is a big decision — especially since the Social Security retirement trust fund is projected to run out by 2032, which itself could result in a 22% cut in retirement benefits (1) across the board.

So you'll want to stay well informed on the latest policies and work through their financial implications so you can identify what makes most sense for you. If you do decide to take lower payments, you may need to tighten your budget as well.

To help you tackle both the goal of staying informed and ways to make most of a tight budget, you might want to consider joining a senior-focused organization like AARP.

As a trusted resource for older Americans, AARP can help you make informed financial and health decisions. It also offers discounts on everything from prescriptions and dental plans to travel, entertainment and insurance.

AARP members get access to guides that can help you make the most of Social Security, choose the right Medicare plan and uncover other government benefits — potentially saving you thousands of dollars.

2. Your benefits may be clawed back if you keep working

If you haven't reached your FRA and plan to keep working when you start collecting Social Security at 62, the SSA may claw back some of your benefits.

One dollar will be deducted from your check for every $2 of income you earn above the annual limit (which is $24,480 in 2026).

In the year you reach your FRA, the deduction drops to $1 for every $3 you earn, which applies until the day you reach your FRA. The annual limit is higher in the year you reach your FRA, at $65,160 in 2026.

After you reach your FRA, there is no longer a clawback, no matter how much you earn. Also, your monthly benefit will be recalculated and increased to account for the benefits that were clawed back.

If you're going to claim Social Security while you're still working — and accept a lower benefit amount — then you may want to invest money now to make up the gap. But if you're feeling stretched financially, you may find it hard to save money to invest in the first place.

But you don't necessarily need a lot of money to start investing in exchange-traded funds (ETFs) — and there are tools to help you save.

The appeal of ETF investing is its accessibility — anyone, regardless of wealth, can take advantage of it. Even small amounts can grow over time with tools like Acorns, an app that automatically invests your spare change.

Signing up for Acorns takes just a few minutes: Link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio.

With Acorns, you can invest in a dividend ETF with as little as $5 — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey.

3. You can't collect Medicare until you turn 65

If, on the other hand, you're planning to fully retire at 62, keep in mind that you can't apply for Medicare until you're 65. Only 27% of firms with 200 or more employees that offer health benefits extend these into retirement (2), according to KFF.

If your workplace isn't one of these firms, then you'll need to budget for medical expenses and will likely need to find insurance to bridge the gap. At age 62, the average monthly premium for medium-tier (Silver-tier) health insurance is $1,691 (3), according to Value Penguin.

This amounts to more than $20,000 per year — and that's before adding in out-of-pocket costs, which can be substantial, particularly if you have a chronic illness.

4. You could miss out on Social Security growth

By waiting until 67 to retire, your Social Security benefit amount will be about 43% higher. For each year you wait beyond your FRA, your monthly benefit will increase by 2/3 of 1% per month, or 8% per year, until age 70. This is about 177% of the benefit you'd receive if you elect to begin taking benefits at 62.

In addition, at 62, you may still be in your highest earnings years. Since your Social Security benefits are based on your 35 best earnings years, you can boost the average by adding more high-earning years.

If you stop working at 62, you'll miss the chance to add these years, which may lower your base monthly benefit. This also means your COLA adjustment, which is based on that amount, will be smaller, too.

With missed opportunities for Social Security growth, it's even more important that your portfolio is well managed. However, for investors with portfolios of $250,000 or more, financial decisions often become increasingly nuanced.

Managing withdrawals, minimizing tax exposure and ensuring long-term sustainability often requires greater coordination and strategic planning. In these cases, working with a financial advisor could help to reduce costly mistakes.

If you have a portfolio of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this kind of planning by answering a few questions about your savings, retirement timeline and overall investment portfolio.

From there, WiserAdvisor reviews its network to match you — for free — with up to three vetted, reputable advisors aligned with your specific needs. You can then schedule no-obligation consultations with your matches to determine who is the best fit for your long-term goals.

Note: WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties and specific financial results are not guaranteed.

5. Your beneficiaries will receive smaller survivor benefits

Your long-term goals may include leaving some money to your dependents. Social Security can help with this, but less so if you begin taking benefits at 62.

If a person passes away while collecting Social Security, their spouse, ex-spouse, child or dependent parent may qualify for survivor benefits. These vary from 71% to 100% of the deceased's benefit amount, with a family limit of 150% to 180%.

Because all amounts are based on the deceased's benefit amount, lower monthly payments at age 62 will reduce the amount available to beneficiaries.

If you want to lessen the impact of a reduced benefit available to your beneficiaries and ensure your family isn't hit with unexpected costs after your death, you may want to consider purchasing life insurance.

Term life insurance provides coverage for a specific period of time (typically between 10 and 30 years) and, if you pass away during that time, your beneficiaries receive a tax-free, lump-sum payout. Permanent life insurance provides coverage that doesn't expire, so long as you continue paying the premiums.

For example, if you're looking for simple and affordable coverage for a set period of time, you may want to consider signing up for term life insurance from Ethos, which has an A+ rating from the Better Business Bureau (BBB).

As a licensed third-party insurance administrator, Ethos has joined forces with some of the industry's top insurance carriers, such as Banner Life, TruStage Financial and Ameritas Life Insurance.

While there are some good reasons to avoid taking your Social Security benefits at 62, everyone's situation is different. But there are plenty of tools available to help you make an informed decision, manage the outcomes and ensure a sound retirement for yourself and security for your loved ones.