The provisions of Social Security policy that impose a penalty for drawing benefits as soon as age 62 have an impact on when individuals choose to begin benefits but a similar provision that enhances the benefits for delaying up to age 70 has far less impact on those decisions, according to an analysis done for Congress.
The Congressional Research Service examined patterns of retirement involving the Social Security “normal” or “full” retirement age, which traditionally was 65, phased up to age 66 for current retirees (more specifically, for everyone born between 1943 and 1954) and will phase up again starting with those born in 1955 until it hits 67 for those born in 1960 and after.
That increase aside, Social Security still allows covered persons to begin drawing benefits as early as age 62, but with a greater penalty than was imposed in the past when the full retirement age was 65. For example, someone with a full retirement age of 66 but who takes benefits at 62 suffers a permanent 25 percent reduction in benefits; that reduction will increase to 30 percent for those with a full retirement age of 67.
Meanwhile, Social Security enhances benefits by 8 percent per year for beginning benefits after full retirement age, up to age 70, after which there is no further increase. Thus, for example, someone with a full retirement age of 66 who draws benefits at age 68 will see a 16 percent permanent increase in benefits.
CRS said that of retirement benefit claims, about 45 percent are filed at age 62 despite the penalty, while about 26 percent are filed at full retirement age. Virtually all the rest are filed at ages 63-65, with only about 1 percent each at ages 67 through 70.