Claiming Social Security early — that is, before full retirement age (FRA) — depends on when you were born. This could be anytime between the ages of 62, when you first become eligible, and when you reach FRA, which can be anywhere from 66 and 2 months to 67.
If you feel claiming early is necessary (or if it seems to make sense to get your money as soon as possible), here are three questions to ask yourself before making that choice.
1. How much will your monthly benefit be reduced?
An early Social Security claim reduces the monthly income you’ll receive for the rest of your life. Exactly by how much depends on how early you file for benefits. Each month you start checks before your full retirement age, you’re hit with an early filing penalty, as follows:
- 5/9 of 1% per month for the first 36 months you start benefits ahead of FRA. That adds up to a 6.7% annual reduction
- 5/12 of 1% for each month in excess of 36 months out from your FRA. This results in an additional 5% annual reduction
Because of these penalties, someone who starts checks at 62 and has an FRA of 67 would be hit with a whopping 30% cut per month, the maximum possible penalty.
An early claim also means giving up the chance to earn delayed retirement credits. These credits increase your benefit 2/3 of 1% per month (or 8% per year) for each month you delay the start of your checks beyond FRA. Passing up this opportunity, in addition to the early filing penalties, can leave you with hundreds of dollars less every month than you’d have if you waited as long as possible — age 70, in this case, when the delayed-filing credits cease.
2. Are you reducing your chances of maximizing lifetime benefits?
Claiming benefits early will generally result in more lifetime income if you pass away before your life expectancy. But if you live longer than the actuaries projected you would, you’d typically be better off claiming benefits later.
When Social Security was created, the system of early filing penalties and delayed retirement credits was put in place to try to ensure a person’s choice of when to start benefits didn’t disadvantage some or advantage others. Seniors were supposed to get the same lifetime benefits regardless of when benefits began, with early filers getting more checks but smaller ones and late filers getting larger checks but not receiving as many of them.
Because life expectancies have lengthened over time, a small majority of retirees now outlive the original projections. As a result, if you want to play the odds and take the step most likely to lead to higher lifetime benefits, you’d want to wait until 70 to claim your checks rather than filing early.
Of course, if you have serious health issues and are likely to pass away young, this calculation will be different for you, and an early claim could pay off.
3. Are you dooming your spouse to financial disaster?
When you start your benefit checks early, you can shrink the survivors benefits your spouse gets if you pass away first.
If you die first, your spouse could get survivors benefits equaling the larger of the two benefits you and your spouse were receiving (or benefits equal to what you’d have received at full retirement age if you hadn’t yet claimed your checks).
This means if you were the higher earner and you claimed benefits early, you’d end up shrinking the amount of money your spouse would otherwise get in survivor benefits. This could lead to financial disaster after you die, since your household’s income could fall dramatically upon your death.
It’s worth considering what your early claim will mean for both you and your spouse in terms of monthly and lifetime income before you make any decisions about an early benefits claim. Otherwise, you or your spouse could be left with major regrets.
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