The Hidden Cost of Claiming Social Security at Retirement Age 62: Why Most Workers Leave $182,000 on the Table

The Decision That Could Define Your Retirement

Millions of Americans face a critical choice when they reach retirement age 62: Should you claim Social Security immediately, or wait? A comprehensive statistical analysis from the National Bureau of Economic Research (NBER) reveals that most people are making the wrong decision—and paying a steep price for it.

The numbers are stark. Among households headed by workers aged 45 to 62, the median loss in lifetime spending power from claiming too early exceeds $182,000 (in 2022 dollars). Yet nearly a quarter of new retirees claim Social Security at 62, and close to half claim before age 66.

Why Americans Misunderstand Social Security Timing

A recent survey from the Nationwide Retirement Institute uncovered a troubling gap in financial literacy: 40% of Americans incorrectly believe their benefits automatically increase after reaching full retirement age (FRA), regardless of when they start claiming.

The reality is far more consequential. Claiming Social Security before your FRA triggers a permanent reduction in benefits. Conversely, delaying benefits beyond your FRA results in permanent increases. This isn’t a minor adjustment—it compounds over decades.

Workers can begin collecting as early as 62, but this choice locks in the smallest possible benefit based on their lifetime earnings history. On the flip side, waiting until age 70 allows you to receive the largest possible benefit. The difference is enormous.

What the Research Actually Shows

The NBER conducted a rigorous 2022 study titled “How Much Lifetime Social Security Benefits Are Americans Leaving on the Table?” The researchers pulled data from the Federal Reserve’s Survey of Consumer Finance and ran two analytical passes:

First pass: They calculated baseline lifetime spending power using actual claiming patterns to establish what people currently receive.

Second pass: They optimized the variables—mathematically determining the claiming age that would maximize total lifetime benefits and spending power for each individual.

The findings were unambiguous: most workers shortchange themselves substantially.

The Case for Waiting Until Age 70

According to the NBER analysis, the data strongly favors delayed claiming:

• Almost all workers aged 45 to 62 should wait beyond age 65 to collect Social Security
• Over 90% should delay until age 70
• If the primary goal is maximizing your lifetime spending power, the vast majority of people should wait until age 70

This holds true even when accounting for inflation and varying life expectancies. The compounding effect of higher monthly payments over time outweighs the months or years of forgone income.

Why People Still Claim Early (Despite the Math)

Understanding the statistics is one thing; applying them to your life is another. Many retirees claim at retirement age 62 for practical reasons that statistics don’t capture:

• Immediate financial need: Some households require income right away and cannot survive on savings alone
• Below-average health: The analysis assumes typical lifespans, making it irrelevant for those facing health challenges
• Quality of life trade-offs: Some people prefer a consistent standard of living and early retirement over maximum lifetime wealth
• Peace of mind: Receiving payments sooner provides psychological certainty

These are legitimate personal considerations, not financial errors.

The Real Question: Optimization vs. Personal Reality

The NBER study assumes one goal: maximizing total lifetime spending power. But retirement goals are deeply personal. Delaying Social Security often requires people to:

• Live significantly below their means between retirement and age 70
• Work longer than planned
• Draw down retirement savings faster in earlier years
• Accept uncertainty about future policy changes

Some people would gladly exchange 10-15% of their lifetime spending power for the ability to retire immediately at 62 or maintain a comfortable lifestyle without watching every dollar.

There is no objectively “right” answer—only the answer that aligns with your circumstances.

Making the Decision With Professional Guidance

When to claim Social Security deserves careful analysis tailored to your situation. Factors that matter include:

• Your personal health and family longevity history
• Current and projected household cash flow needs
• Other sources of retirement income (pensions, investments, part-time work)
• Tax implications of different claiming ages
• Spousal and survivor benefit considerations

The Bottom Line: If your sole objective is maximizing lifetime benefits, the data is clear: claim Social Security after age 65 whenever possible, and ideally at age 70. But if your life circumstances demand earlier access or different priorities take precedence, that decision deserves respect too. The key is making an intentional choice based on your actual situation, not defaulting to age 62 by habit or assumption.

Working with a financial advisor who specializes in Social Security optimization can help you understand the long-term financial impact of different claiming ages and ensure your decision serves your overall retirement strategy.