Why you Shouldn't Claim at 62 #1: Guaranteed Increase in Benefit of 6.66% – 8.33% Every Year

Why you Shouldn't Claim at 62 #1: Guaranteed Increase in Benefit of 6.66% – 8.33% Every Year

Not many people know that delaying their Social Security Benefit Claim could give them a higher benefit amount. In fact, for every year you delay past age 62, you are guaranteed an increase in benefit of 6.66% – 8.33%. Age 62 is still the most popular age to claim Social Security, but the number of people claiming at age 62 has decreased dramatically over the last 13 years.

In 2010, 52% of people claimed their benefits at age 62. In 2021, that percentage dropped to only 30%. Why the substantial drop in the number of people claiming at age 62? I strongly believe the reason for the drop is that people have become aware of the advantages to delaying the claiming of their benefits.

There are still a lot of people who claim at age 62 and for some very good reasons.

One of the biggest reasons is they lost their job, can’t find another job, and desperately needed the income. Or they worked at a job they hated and could not wait to retire at age 62. Another good reason is they are in poor health (single or married with the smaller benefit), and don’t think they will live long. So they claimed at age 62 to get the most money out of Social Security before they passed away. Others will say they claimed at 62 so they could enjoy their retirement when they were still relatively young and in good health. There are even more reasons that people use to justify claiming at age 62, but I think the ones I outlined here are the most popular ones.

Now let’s take a look at the first compelling reasons why you should not claim your benefits at age 62.

Guaranteed Increase in Benefit

The chart below shows, in percentage terms, how much your benefit will increase every year you delay claiming it past age 62. For this example, we assumed you have a Full Retirement Age benefit at age 67 of $2,000.

62 63 64 65 66 67 68 69 70
$1,400 $1,500 $1,600 $1,733 $1,866 $2,000 $2,160 $2,320 $2,480
7.14% 6.67% 8.33% 7.71%  7.18% 8.00% 7.41% 6.89%
0% 0.3% 2.0% 2.80% 1.6% 1.3% 5.9% 8.7%
7.14% 6.70% 10.33% 10.51% 8.68% 9.3% 13.31% 15.59%
$1,500 $1,605 $1,772 $1,983 $2,137 $2,338 $2,659 $3,090

Claiming at age 62 will reduce your benefit to only $1,400 per month. Delaying one year and claiming at age 63 will increase your benefit by 7.14% up $1,500 per month. And delaying an additional year up to age 64 will increase your benefit by another 6.67% up to $1,600 per month. If you want to get the biggest percentage increase, then delay claiming your benefit one more year. That will increase your benefit by an additional 8.33% and pay you $1,733 per month. The chart shows all the percentage increases you will receive every year you delay claiming after age 62 up to age 70. If you were to delay claiming your benefit until age 70, your monthly benefit of $2,480 is 77% bigger than the age 62 benefit of $1,400.

Where else are you going to find a risk-free and guaranteed rate of return of 6.66% – 8.33% per year? And you lock into that higher income for the rest of your life! It is one of the best deals around, and you are about to find out that deal gets even better.

Add COLA Increases On Top Of The 6.66% – 8.33%

Also, if you delay, you can add any annual COLA increases on top of the 6.66% – 8.33% guaranteed increase. That makes the case even more compelling to delay claiming past age 62.

In the example, I assume that you turned age 70 this year in 2023. I used the actual COLA increase every year over the last 8 years, starting in 2016. In 2016 there was no COLA increase, it was 0%. The next year in 2017, when you were age 64, it wasn’t much better with only an increase of 0.3%. But when you were age 65, the COLA increase that year was 2.0%. When you add that to the guaranteed increase of 8.33%, by delaying from age 64 to age 65, you increased your benefit by a total of 10.33% (8.33% + 2.0%).

But look what happened over the last two years, when you were 69, the COLA increase was 5.9% for a total increase in your benefit of 13.31% and in 2023, when you turned age 70, the COLA increase was 8.7% giving you a total benefit increase for that year of 15.59%, which also increases your monthly benefit to $3,090. Compare that to your age 70 benefit before the COLA increases of only $2,480. Applying the last 8 years of COLAs, increased your age 70 benefit by $610 per month ($3,090 – $2,480) or an additional $7,320 for the year. 

Breakeven Analysis

If you do a Breakeven Analysis and only use the benefit amounts that appear on your Social Security statement, and don’t assume any rate of inflation, the Breakeven Age you calculate is wrong, it is too high or too old. More on this later.   

 It really is an incredible deal if you delay claiming your benefits past age 62, in fact, it is one of the best deals around. Even if you say you can’t wait until age 70 to claim your benefits, but you can delay for 3, 4 or 5 years past age 62, your benefit is going to be so much bigger because of the guaranteed 6.66% – 8.33% guaranteed increase and any COLA increases on top of that. If you claim your benefits at age 62, you will miss out on this incredible deal. 

This blog is #1 in a series of 4. To read the others, simply follow the links below:

#2: You’ll receive the smallest pay raise every year for the rest of your life

#3: Your Social Security Benefit Amount Will be Larger than Suggested

#4: You May Live Longer Than You Think

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