Should You Claim Social Security at 62 and Invest It? Here's What You Need to Know
One of the most common questions I receive from listeners, readers, and clients approaching retirement is:
"Would I be better off claiming Social Security at age 62 and investing the money instead of waiting until my full retirement age?"
It's a logical question. After all, if the stock market has historically returned more than 6% annually, couldn't you come out ahead by collecting your benefit early and putting those monthly checks to work?
The answer is: it's possible—but for most retirees, it's probably not the best strategy.
The decision involves much more than simply comparing Social Security benefits to stock market returns. You must also consider earnings limits, taxes, cost-of-living adjustments (COLAs), life expectancy, survivor benefits, and your overall retirement income plan.
Let's break it down.
Can You Collect Social Security at Age 62?
Yes.
Most individuals can begin collecting Social Security retirement benefits as early as age 62 (or earlier if they qualify for Social Security Disability Insurance).
However, collecting before your Full Retirement Age (FRA) permanently reduces your monthly benefit.
For anyone born in 1960 or later, Full Retirement Age is 67.
If you begin collecting at 62:
You'll receive 70% of your Full Retirement Age benefit
Your monthly benefit is permanently reduced by 30%
Waiting until your Full Retirement Age allows you to receive your full benefit.
If You're Still Working, Don't Forget About the Earnings Test
One of the biggest misconceptions about claiming Social Security early is that you'll automatically receive your monthly benefit while continuing to work.
That's not always true.
If you claim benefits before reaching your Full Retirement Age and continue earning wages, the Social Security earnings test may reduce—or completely eliminate—your monthly benefit.
2026 Earnings Limits
If you are under your Full Retirement Age for the entire year:
You can earn up to $24,480
Social Security withholds $1 of benefits for every $2 earned above the limit
During the year you reach Full Retirement Age:
You can earn up to $64,080
Benefits are reduced by $1 for every $3 earned above the limit
Beginning with the month you reach Full Retirement Age, the earnings limit disappears.
For someone still working full-time, claiming Social Security at 62 often provides little immediate benefit because much—or all—of the benefit may be withheld.
How Much Does Waiting Increase Your Benefit?
Many people think of delaying Social Security as simply "waiting longer."
A better way to think about it is that you're purchasing a larger guaranteed monthly income.
Between ages 62 and 67, your benefit increases by approximately 6% per year.
From Full Retirement Age to age 70, delayed retirement credits increase your benefit by 8% per year.
These increases are guaranteed by the Social Security Administration—not dependent on market performance.
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Could You Earn More by Investing Instead?
Technically, yes.
Historically, the U.S. stock market has produced average long-term returns that exceed 6% annually.
However, there are several important considerations.
Market Returns Are Never Guaranteed
To outperform the guaranteed increase provided by delaying Social Security, you'd likely need to invest heavily in stocks.
Unlike Social Security:
Markets fluctuate.
Returns vary.
Losses are possible.
Historical averages don't guarantee future performance.
There have been many multi-year periods where stock market returns were well below historical averages—and some periods where investors lost money altogether.
Don't Forget About Investment Taxes
Even if your investments outperform Social Security's guaranteed growth, taxes can reduce your returns.
For example:
Dividends may be taxable each year.
Capital gains may be taxable when investments are sold.
Interest income is generally taxed annually.
These taxes reduce the amount of money available to continue compounding over time.
Social Security's delayed retirement credits, on the other hand, aren't subject to market risk and don't require you to generate investment returns to receive them.
Cost-of-Living Adjustments Make Waiting Even More Valuable
Another factor many people overlook is the impact of annual Cost-of-Living Adjustments (COLAs).
Each year, Social Security benefits may receive a COLA based on inflation.
Here's the important point:
A larger monthly benefit receives a larger dollar increase every time a COLA is applied.
For example:
If one retiree receives:
$2,100 per month
and another receives:
$3,000 per month
Both receive the same percentage COLA.
However, the retiree receiving the larger benefit gets a much larger dollar increase every year.
Over decades of retirement, this compounding effect can become significant.
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Example: Waiting Can Produce More Lifetime Income
Consider someone whose Full Retirement Age benefit is:
$3,000 per month
If they claim at 62:
Approximately:
$2,100 per month
If they wait until age 70:
Approximately:
$3,720 per month
That larger benefit continues for the rest of their life and serves as the basis for future COLAs.
For retirees who live into their 80s or beyond, delaying benefits often produces substantially greater lifetime Social Security income.
Taxes Matter Too
Another often-overlooked consideration is income taxes.
If you're still working and claim Social Security:
Your wages increase your taxable income.
A larger portion of your Social Security benefits may become taxable.
By waiting until retirement, your overall taxable income may be lower, allowing you to keep more of your Social Security benefits after taxes.
Every situation is different, but taxes should absolutely be part of the analysis.
Who Might Benefit From Claiming Early and Investing?
While delaying benefits makes sense for many retirees, there are situations where claiming early may be reasonable.
Examples include:
Individuals with significant pensions and investment assets who don't need Social Security income.
Investors whose primary goal is leaving an inheritance.
Individuals with shorter life expectancies.
Those with substantial wealth who can comfortably assume market risk.
These situations are the exception—not the rule.
Why Married Couples Should Think Carefully
For married couples, delaying Social Security can be even more valuable.
When one spouse dies, the surviving spouse generally keeps the larger of the two Social Security benefits.
That means if the higher-earning spouse delays benefits, they may not only increase their own retirement income—they may also leave their surviving spouse with a significantly larger lifetime benefit.
For many couples, this survivor benefit alone can justify delaying Social Security.
Questions to Ask Before Claiming Social Security
Before deciding when to collect, ask yourself:
Am I still working?
Will the earnings test reduce my benefits?
Do I actually need the income today?
What is my expected life expectancy?
How will taxes affect my benefits?
What impact will this decision have on my spouse?
Could delaying create greater guaranteed lifetime income?
The answers to these questions often matter more than simply asking whether the stock market might outperform Social Security.
Final Thoughts
Could you claim Social Security at 62, invest every check, and ultimately come out ahead?
Yes—it is possible.
But doing so requires accepting market risk, managing taxes, and foregoing one of the few sources of guaranteed, inflation-adjusted lifetime income available to retirees.
For many individuals, delaying Social Security provides something difficult to replicate elsewhere: a guaranteed increase in lifetime income, enhanced survivor benefits, and larger future Cost-of-Living Adjustments.
Because every retirement plan is different, the best claiming strategy depends on your income needs, investment portfolio, tax situation, health, life expectancy, and marital status.
Rather than making this decision based solely on potential investment returns, it's worth evaluating how Social Security fits into your broader retirement income strategy.
As always have a wonderful day,
a better weekend,
and I look forward to writing to you next Friday!
Written by Ryan Morrissey CFP®, CLU®, CHFC®, CMFC
Founder & Principal Advisor of Morrissey Wealth Management
Host of the Retire with Ryan Podcast