How Much Do You Lose By Retiring at 62? Benchmarks and Examples

How much you can lose by retiring at 62 depends on Social Security, savings growth, and pensions. Starting Social Security at 62 usually cuts monthly benefits by 25% to 30% compared to waiting until full retirement age. Retiring early also means fewer years to save and less time for investments to grow. Pension checks may be smaller too. Your health, lifestyle, and how long you expect to live also matter when weighing the trade-offs of leaving work early.

If you want to retire early, a financial advisor can help you create a plan that balances your savings, Social Security, pensions, and withdrawals to meet your income needs.

Social Security benefits are calculated using your highest 35 years of earnings, adjusted for inflation. The average of these years is called the average indexed monthly earnings (AIME). This average is run through a formula with fixed “bend points” that determine your primary insurance amount (PIA). The PIA is the benefit you’d receive at full retirement age.

Retiring at 62 doesn’t change how your AIME is calculated, but if you claim at that age it will affect the size of your payments. Claiming early applies an actuarial reduction to your PIA: a 5/9 of 1% cut for each of the first 36 months before full retirement age, and 5/12 of 1% for additional months.

For someone whose full retirement age is 67, starting benefits at 62 is 60 months early. This translates to a 30% permanent reduction in benefits. That lower monthly amount also compounds into smaller annual cost-of-living adjustments, reducing lifetime Social Security income compared with waiting longer.

Leaving the workforce at 62 also changes the trajectory of retirement savings. Not only do you stop contributing, but you also forgo the years when balances are typically at their highest and compounding is most powerful. For example, contributions in your early 60s often represent some of the largest dollar amounts because salaries tend to peak late in a career, and catch-up contributions are allowed. Retiring earlier cuts off those high-value years.

Additionally, withdrawals may need to start sooner, shortening the period your money has to grow untouched. This combination of reduced contributions and earlier withdrawals can alter the sustainability of your savings over a 25- to 30-year retirement horizon.

For those with a defined benefit pension, retiring at 62 also usually has an impact. Many pension plans base benefits on years of service and final average salary. Retiring before reaching the maximum service threshold may leave you with fewer credited years, directly lowering the calculation. Some plans also apply early retirement reduction factors, cutting monthly payments if benefits begin before a specified age, such as 65.

On the other hand, certain pensions include provisions for “early retirement windows” or subsidized benefits, which can soften the impact. Understanding how your specific plan calculates benefits at 62 compared with later ages is essential to gauging the true effect.

Fidelity suggests¹ that workers save a multiple of their annual salary at different ages to stay on track for retirement at 67. According to this rule of thumb, you should have about one times your salary saved by age 30, three times by 40, six times by 50, eight times by 60 and 10 times by 67. These benchmarks assume retirement at full retirement age and a career of steady saving and investing.

Planning to retire at 62 requires adjusting these targets upward. Leaving the workforce five years earlier means relying on savings for a longer period while forgoing additional years of compounding and contributions. Instead of aiming for 10 times your salary by 67, someone looking to retire early may need closer to 14 times their salary by age 62, depending on spending needs and other income sources like pensions. Reaching this higher target helps account for both the extended drawdown period and the reduced growth time.

These adjustments highlight how guidelines serve as starting points rather than fixed rules. Retirement timing, expected expenses and outside income sources all shift the amount you’ll need in savings. For those targeting an earlier retirement age, it’s helpful to treat Fidelity’s framework as a baseline and then scale it to reflect the realities of five extra years without employment income.

Consider two scenarios to see how early retirement changes income. Suppose you are 62 with a salary of $80,000 and have saved eight times that amount, or $640,000, in retirement accounts. If you retire now, you stop contributing those high-value late-career savings and begin withdrawals immediately. Your Social Security benefit, which would have been $2,000 per month at full retirement age, is reduced by 30% to about $1,400 if you claim at 62. Over a 25-year retirement, that difference amounts to more than $180,000 in lost Social Security income alone.

Now imagine you keep working until 67, adding five years of salary plus catch-up contributions. With investment growth, your nest egg could increase from $640,000 to roughly $900,000, even before considering continued employer contributions. At the same time, delaying Social Security boosts your monthly check to the full $2,000, or even more if you wait until 70. The gap between retiring at 62 and working until 67 isn’t just in monthly payments but in the total wealth available to support a longer retirement.

Retiring at 62 isn’t always disadvantageous, and much depends on your break-even point. This refers to the age at which the total benefits received from claiming early equal the total you would have received by waiting until full retirement age or later. For example, if you start benefits at 62 and collect smaller checks for more years, you may come out ahead if you live into your late 70s but not well into your 80s or 90s.

One way to assess the decision to delay benefits is to look at it as if you were investing an amount equivalent to the monthly payments you are foregoing. Fifteen or more years is an unusually long wait for an investment to break even. A lot can happen in that period of time and money received now is more valuable than money received on a date far in the future.

Health, family history and lifestyle also play roles. If you expect a shorter life expectancy or need income sooner to cover expenses, starting at 62 can be practical. Retiring early may also make sense if you have other reliable income sources that reduce reliance on Social Security. In these cases, claiming at 62 offers more flexibility, even though it reduces lifetime benefits if you live past the break-even age.

Retiring at 62 can shorten your career saving years and lengthen the time that you’ll need to rely on your nest egg. The trade-off is between lower lifetime income and the benefit of having more years of free time. Your retirement age decision will depend on your health, spending needs and other income sources.

• A financial advisor can help you determine when is the best time retire and manage other factors to maximize your benefits. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.

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