Turning 62 in 2017? Here's What You Need to Know

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You'll reach several milestone ages as you get older, and 62 is one of them. Specifically, the big change that happens when you turn 62 is that you'll be eligible for Social Security benefits for the first time. Here's what you need to know about claiming Social Security at 62 and a few things you need to consider before filling out your application.

How much Social Security will you get if you claim at 62?

The most popular age for claiming Social Security benefits is -- you guessed it -- 62. If you're turning 62 in 2017 and start collecting Social Security, you can expect your benefit to be about 26% lower than it would be if you had waited until full retirement age.

Your Social Security benefit depends on two main factors:your lifetime monthly average earnings and your age when you claim benefits.

To calculate your lifetime monthly average earnings, each year's earnings on your Social Security work record is adjusted for inflation. The highest 35 years are averaged together and divided by 12 to determine your monthly average, which is applied to a formula. As of 2016, the Social Security benefits formula is:

90% of the first $856
32% of the amount above $856, up to $5,157
15% of the amount above $5,157

This formula calculates your primary insurance amount, or PIA, which is the benefit you'd be entitled to at full retirement age, which is between 66 and 67, depending on the year you were born. For those turning 62 in 2017 (born in 1955), full retirement age is 66 years and two months. For early retirement, your benefit is permanently reduced by 6 2/3% per year for up to three years before full retirement age and an additional 5% per year (5/12% per month) beyond three years.

So, if you are turning 62 in 2017 and claim Social Security as soon as possible, you'll be claiming four years and two months early. Based on the reduction percentages, this translates to approximately 26% less than your benefit would be at full retirement age.

You can see an estimate of your full retirement benefit, as well as an estimate of how claiming at 62 could affect it, by creating an account at www.ssa.gov and viewing your latest Social Security statement.

Other things to consider before you take Social Security

In addition to the benefit reduction and whether or not a few extra years of benefits is worth it, there are some other things you should consider before deciding to file for benefits. For instance:

Spousal benefits -- If your spouse plans to collect a Social Security benefit based on your work record, it's important to realize that he or she cannot begin collecting a spousal benefit until you are collecting your own retirement benefit. This can be a particularly important factor if your spouse is older than you are, as spousal benefits do not increase beyond full retirement age. Here's a more thorough discussion of spousal benefits, but in many cases, it doesn't make sense to delay your own retirement benefit past your spouse's full retirement age.
Did you work for 35 years? -- I mentioned earlier that your Social Security benefit is based on your highest 35 years of inflation-adjusted earnings. If you haven't worked for 35 years by the time you claim benefits, the missing years will be averaged in as "0." So, if you're at 33 or 34 working years at the time you reach age 62, it may be worthwhile to wait for another year or two. The same can be said if you have a few low-earning years weighing your average down. As a personal example, I currently have 19 years on my Social Security work record, but three of those consist of small amounts of earnings from part-time work when I was in high school and college. I plan to work until these are not included in my top 35.
Healthcare -- While you're eligible for Social Security at 62, most Americans aren't eligible for Medicare until 65. If you plan to keep working after claiming your benefit or can keep your health insurance after you retire, this isn't a factor, but for everyone who decides to retire early, your pre-Medicare healthcare costs need to be considered.

This isn't an exhaustive list, and these factors should be considered along with other aspects of your life in order to decide the best Social Security age for you. Regardless of whether you plan to claim benefits at 62 or not, now that you've reached the age of eligibility, it's a good idea to learn the details of how Social Security works in order to formulate an action plan for you and your spouse.

If you choose to claim Social Security at 62

After weighing the pros and cons, if you decide that claiming your Social Security retirement benefit at 62 is the right move for you, you can apply on www.ssa.gov. This should take you about 15 minutes to do, or if you'd be more comfortable applying over the phone or in person at a Social Security office, these options are also available.

You can apply for benefits to start at 62 as early as 61 years and nine months of age, and it's important to note that your benefits are paid out during the month after they're due. For example, your July Social Security benefit will be paid out in August. So, if you apply as early as possible, don't expect your first check until the month after your birthday.

What if you change your mind later?

The good news if you change your mind after claiming your retirement benefit is that if you claim early, the Social Security Administration allows a one-time withdrawal of your application. The catch is that this do-over must be initiated within one year of claiming your benefit, and all of the money you receive from Social Security before withdrawing your application must be repaid.

Obviously, this can be a large amount of money, and may or may not be practical for you to pay back all at once. Therefore, the decision of whether you should claim Social Security early or not should be taken very seriously, and the application withdrawal option should be used as a last resort.

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