For several decades, the most popular choice for retirees was claiming Social Security at 62. But in the past several years, data has shown that it has become a less common age to file. There are several reasons for this and they may leave you wondering when the best time is for you to start receiving your benefits.
Read on to learn more about the history of claiming Social Security at 62 and whether or not you should consider filing at that age.
History of Retirement Ages for Social Security
For the first few decades the Social Security program was available, the minimum age to receive benefits was 65. It wasn’t until 1956 that this changed, when the Social Security Amendments of 1956 allowed women to file for benefits at an earlier age. Men had to wait until the 1961 amendments to be eligible to file for Social Security at 62.
The rationale that lawmakers used when making this change was to offer protection to older workers who had lost their jobs in a series of recessions in the past decade.
In a summary of the 1961 legislation the Commissioner of Social Security said, “Men and women make social security contributions over the years in the expectation of receiving insurance benefits when they are too old to work. They should have a degree of protection if they find themselves unable to get work because of conditions beyond their control when they are nearing retirement age, even though they have not reached age 65.”
In the years since these two amendments, the number of people claiming Social Security at 62 increased drastically. By 1985, more than 50% of all benefits were claimed at 62. This remained the case until about 2011, when there started to be a decline in the number of people filing at that age, which continued through the years. As of 2021, only about 25% of people file for Social Security at 62.
Why Fewer People are Claiming Social Security at 62
The question remains – why have we seen such a sharp decline in the number of people claiming Social Security at 62 in the last 10 years? We see three main reasons for this:
Changes to Full Retirement Age
The first is likely a response to recent changes to the full retirement age. In 1983, Social Security amendments instituted a gradual increase to the full retirement age. Before, the full retirement age was 65, but depending on the year you were born, the age has increased up to 67.
This is important because of how your Social Security benefit is reduced when you file early, or before your full retirement age. These reductions are calculated on a monthly basis. So even though people are still eligible to start filing for benefits at 62, the number of months between 62 and that person’s full retirement age has gotten bigger. That equates to a larger reduction in your benefits. If your full retirement age was 65, the reduction for filing at 62 was 20%. But if your full retirement age was 66, the reduction was 25%, and for those whose full retirement age is 67, the reduction is 30% if you file at 62.
We can see in the data that as the gap between age 62 and full retirement age grew, fewer people made the decision to file early.
You can see below the significant drop in the percentage of people filing at 62 from 2005 to 2016. That’s the band when full retirement age was at 66. And then we can continue to see it drop as the full retirement age has begun to transition from 66 to 67.
(Note, the slight increase in percentage at the end of this graph is likely due to the COVID great resignation that we saw in older Americans.)
As the new full retirement age of 67 starts to settle, we can expect to see the percentage of people claiming Social Security at 62 continues to decline.
Americans are Working Longer
The second reason fewer people are claiming Social Security at 62 is likely because Americans are working longer on average, as demonstrated in labor force participation rate data. (This is what percentage of the population is actively working or looking for a job.)
The chart below breaks data down into three different age groups: 55 to 64, 65 to 74, and 75 and older.
In 2001, 60.4% of those aged 55 to 64 were in the labor force. By 2021, this was at 64.6%, and it is projected to be at 68.2% by 2031.
The 65 to 74 age group saw a big increase. In 2001, only 19.7% were in the labor force. By 2021, this was at 25.8%, and by 2031 that’s projected to increase to 30.7%.
The 75 and older group has seen some big increases as well. In 2001, only 5.2% of that age group was working, and by 2031 this is projected to be more than double that at 11.1%.
There are lots of reasons why people are working longer, including the shift we’ve seen from pension plans to defined contribution plans like a 401(k). In general, the responsibility to provide an income in retirement has shifted from the employer to the worker, so employees are working longer to ensure they have enough saved.
More Accessible Information on Retirement Strategies
The third reason that fewer people are claiming Social Security at 62 probably comes down to the fact that there is more information available to help retirees make better decisions.
As online educational resources have replaced word-of-mouth advice from family and friends, we can see retirees making smarter decisions about managing their benefits. People are more likely to back up tips with online research from financial professionals.
Plus, as retirement becomes more complicated, more in-depth research on each individual’s part is required. Retiring used to be fairly easy. Just leave work one day and your pension starts. Now people are retiring with 401(k)s, IRAs, Roth accounts, brokerage accounts, and Social Security – and just about all of these are taxed differently.
With this in mind, retirees have become more aware of the need to carefully plan and coordinate how to access their income from these various sources to make sure their money is going to last throughout retirement – and that they don’t pay too much in taxes.
This correlates with the reduction we see in people claiming Social Security at 62, likely because people have a better understanding of exactly how doing so will affect their benefit amounts and future financial security.
Should You File for Social Security at 62?
This can be a bit convoluted to unravel, and it can depend on the individual. I created my free online workshop, how to choose the right time to file for social security, where you can learn about the nine factors to consider before you file for your Social Security benefits.
You’ll learn about how to coordinate your Social Security filing decision with your other assets and income for a tax-efficient distribution strategy, and I will show you how to simplify this decision with a clear-cut process so you’ll be confident you’re making the right choice.