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Between now and 2030, the final and largest cohort of the baby boomer generation will reach retirement age. The bulk of them will take Social Security benefits early, according to research from the Alliance for Lifetime Income.

Scott Sturgeon, founder and senior wealth advisor at Oread Wealth, has seen it all. “Some clients want to start Social Security distributions early because they’re concerned they might not live long enough to get back anywhere close to the amount they contributed,” he said. “Others worry that Social Security could become insolvent and they won’t get anything at all.”

It’s not an idle concern. The nonpartisan Congressional Budget Office forecast that the Social Security Old-Age and Survivors Insurance (OASI) trust fund will become insolvent by 2033. This raises questions about what kind of Social Security benefit older Americans can expect if they wait to enroll — or what any Americans can expect, for that matter. 

And, of course, some older adults just want to ditch their nine-to-five job and kick back to enjoy their golden years. 

Social Security Benefit Refresher

Older Americans who opt into Social Security benefits at age 62 receive smaller benefit checks than those who wait. 

Americans born between 1943 and 1954 reach full Social Security benefit age at 66. Full retirement age ticks upward for those born between 1955 and 1960, and settles at 67 for those born in 1960 or later. 

However, the monthly benefits keep rising the longer you delay taking benefits, up to age 70. “Every year you wait, your annual benefit amount increases by 8%,” explained Sturgeon. “That may not sound like much, but it can be a significant amount when you think about it in the context of decades worth of payments.” 

Waiting until the latest possible age to take benefits enables you to collect 32% more than you could have at full retirement age — hardly chump change. 

Among retirees who did take benefits at the earliest opportunity at age 62, why do they regret doing so?

Lower Monthly Payments

If those turning 65 this year had started taking benefits at 62, they’d collect 30% less each month than those who waited until their full benefit age.  

“My clients typically wait, since they stand to benefit so much from at least waiting until full retirement age,” said Sturgeon. “I totally understand the temptation to start collecting benefits early, but I try to illustrate for clients how impactful waiting can be for them. It can be really helpful in making a huge decision.”

Fewer Working Years

If you retire at age 62 and immediately start taking benefits, you not only collect less in benefits each month, but you also miss out on future earnings. Workers who keep cranking until 65 or 70 have longer to pad their nest eggs, on top of delaying benefits.

When they do retire, they can enjoy both higher monthly benefit checks from Social Security and a larger retirement savings to draw down.

Longer Retirement, Lower Withdrawal Rates

The longer you need your nest egg to last, the less you can withdraw from it each year.

This compounds the problem even further for people who retire at 62 and start taking skimpy benefits. On top of the thinner nest egg and lower monthly benefits, they have to stick with a low withdrawal rate. 

In contrast, Americans retiring at 70 can potentially withdraw a higher percentage each year. They know that their nest egg doesn’t have to last as long, so they can pull more out every year.

Lower Benefits Can Force Retirees to Drain Savings Faster

Justin Haywood, president of Haywood Wealth Management, sees some of his older clients resort to draining their retirement accounts faster than they should due to their low monthly benefits.

“What tends to happen, over time, is the reduced monthly benefit that comes with taking Social Security early requires them to withdraw more money from their retirement accounts to cover their expenses,” he explained. “Clients who take benefits early often have to dip deeper into their retirement savings to maintain their desired lifestyle, which can deplete their nest egg more quickly than anticipated. It becomes especially visible as they navigate through their 70s and beyond.”

Final Thoughts

Timing your retirement is complicated and deeply personal. 

“Ultimately, the decision depends on each person’s personal circumstances,” noted Haywood. “The immediate benefits and the ability to retire earlier provide significant personal satisfaction, even if it means adjusting their financial plans later on.

“The ability to retire sooner often outweighs the financial trade-offs for them. The key is having a well-rounded retirement plan that accounts for these potential withdrawals and adjusts investment strategies accordingly to ensure long-term sustainability.”

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