If you are close to retirement with a nest egg of $850,000 and a small pension, claiming Social Security early may make sense. However, claiming benefits as soon as you become eligible at age 62 will permanently reduce your monthly income. This can add up to a loss over the lifetime of your retirement.
What Claiming at 62 Could Cost
Someone born in 1960 or later has a full retirement age of 67. Claiming at 62 means starting benefits five years early, which reduces the monthly benefit to 70% of the full amount, a permanent 30% reduction. 1
For context, the average Social Security retirement benefit was about $2,071 per month as of January 2026. 2 To show how claiming early could affect your benefits, let’s use that average as an example for a retiree who qualifies for a $2,071 monthly benefit at their full retirement age of 67. Claiming at 62 would reduce that amount to approximately 70% of the full benefit:
| Category | Amount |
|---|---|
| Monthly benefit at 67 | $2,071 |
| Reduction for claiming at 62 | 30% |
| Dollar reduction | $2,071 × 30% = $621.30 |
| Monthly benefit at 62 | $2,071 − $621.30 = $1,449.70 |
| Annual benefit at 62 | $1,449.70 × 12 = $17,396.40 |
| Annual benefit at 67 | $2,071 × 12 = $24,852 |
In this example, waiting until 67 would produce an additional $621.30 per month, or approximately $7,455.60 per year. On a retirement that lasts to age 85, the difference would look like this before cost-of-living adjustments and taxes:
| Category | Amount |
|---|---|
| Claim at 62 | $17,396.40 × 23 years = $400,117.20 |
| Claim at 67 | $24,852 × 18 years = $447,336 |
| Additional lifetime benefits from waiting | $447,336 − $400,117.20 = $47,218.80 |
The retiree who waits receives checks for fewer years, but each check is permanently larger. Claiming later may only work when savings and pension income can cover the five-year income gap. A financial advisor could help you estimate how much you’d receive at different claiming ages and decide whether you should use savings to bridge the gap for a larger claim.
Using Savings to Bridge the Social Security Age Gap
Since claiming later means going without Social Security income for five more years, one option may be to draw more heavily from the $850,000 portfolio during that stretch. This effectively uses savings as a bridge until the larger benefit becomes available at 67. Assuming the small pension covers part of your retirement expenses, here’s an example that leaves a $24,000 annual gap:
| Category | Amount |
|---|---|
| Annual amount needed from savings | $24,000 |
| Length of bridge | Five years |
| Total portfolio withdrawals | $24,000 × 5 = $120,000 |
This example does not include investment returns, taxes or inflation. It does, however, show how a retiree would need to use approximately $120,000 of savings as a bridge for five years until they could claim a larger Social Security benefit.
To decide if the five-year bridge is worth the money, you may want to estimate a break-even age that compares how benefits would have been collected between ages 62 and 67 to the additional income gained by waiting.
| Category | Amount |
|---|---|
| Benefits that would be received from 62 through 66 | $20,160 × 5 = $100,800 |
| Additional annual benefit after 67 | $8,640 |
| Estimated time needed to recover forgone benefits | $100,800 ÷ $8,640 = 11.7 years |
Since that 11.7-year recovery period starts at age 67, when the larger benefit begins, waiting could pay off around age 79 (67 + 11.7 years). Living beyond that point would favor delaying, but a shorter lifespan may favor claiming sooner. Taxes, investment performance and cost-of-living adjustments could change this example.
When Claiming Early Could Make Sense
Claiming at 62 could make sense in situations with health concerns, shorter lifespan expectations, or immediate income needs. A pension may help you delay Social Security, but payments and withdrawals from tax-deferred accounts can raise taxable income and potentially make part of the Social Security benefit taxable as well.
Calculating a break-even age could help you estimate when delaying may start paying off. A financial advisor can work with you to factor in taxes and investment growth based on your Social Security estimate, tax situation and portfolio performance.
Photo credit: ©iStock.com/Hispanolistic, ©iStock.com/yongyuan.
Read the full article here
