The Effect of Retirement Under Social Security at Age 62

Document Type



Published by The Financial Planning Association in Journal of Financial Planning; Volume 17, Issue 1, January 2004, Pages 64-71.

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Social security, Disadvantages, Early retirement


The reduction in Social Security benefits due to early retirement at age 62 is greater than often realized. When calculating how much benefits will be reduced by retiring as early as age 62, observers often underestimate the reduction because they fail to account for the annual cost-of-living adjustments and make other incorrect assumptions relative to the reduction. The article explains how Social Security calculates a worker's "average indexed monthly wage" and how the primary insurance amount is in turn calculated from that, using "bend points." An accurate calculation of early retirement benefits is also key to spousal benefits, because a reduction of benefits for the primary worker may affect the amount of benefits the spouse receives both during the marriage and after the worker's death. A 62-year-old male has more than a 93% chance of living to normal retirement age, and a couple has more than a 99% chance that one of them will reach normal retirement age.