Claiming Social Security early — that is, before full retirement age (FRA) — depends on when you were born. This can be any time between age 62, when you first become eligible, and when you reach FRA, which can be between 66 and 2 months to 67.
If you think claiming early is necessary (or if it makes 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 will receive for the rest of your life. How much exactly depends on how early you apply for benefits. Each month you start checking checks before full retirement age, you will be subject to an early filing penalty, as follows:
- 5/9 of 1% per month for the first 36 months you start benefits before FRA. That equates to an annual reduction of 6.7%
- 5/12 of 1% for any month over 36 months from your FRA. This results in an additional annual reduction of 5%
Because of these fines, someone who starts checking at 62 and has an FRA of 67 would receive a whopping 30% discount per month, the maximum possible penalty.
An early claim also means giving up the opportunity to earn deferred retirement loans. These credits increase your benefit by 2/3 of 1% per month (or 8% per year) for each month you delay the start of your post-FRA checks. If you pass up this opportunity, in addition to the early filing penalties, you could end up with hundreds of dollars less each month than you would have had you waited as long as possible — in this case, 70 years, when the delayed filing credits run out.
2. Are You Reducing Your Chances of Maximizing Lifetime Benefits?
Claiming benefits early will generally result in more lifetime earnings if you die before your life expectancy. But if you live longer than the actuaries predicted, you’d usually be better off claiming benefits later.
When Social Security was created, the system of early filing penalties and deferred retirement credits was put in place to try to ensure a person’s choice to start receiving benefits was not detrimental to some or others. Seniors would receive the same lifetime benefits regardless of when the benefits started, with early submitters getting more checks but smaller ones and late petitioners getting bigger checks but not receiving as many of them.
Because life expectancy has increased over time, a small majority of retirees now survive the original projections. As a result, if you want to take the opportunity and take the move most likely to lead to higher lifetime benefits, you might want to wait until 70 years to claim your checks instead of filing early.
If you have serious health problems and are likely to die young, this calculation will of course be different for you and an early claim may pay off.
3. Are you condemning your spouse to a financial disaster?
Starting your benefit checks early can help you reduce the survivor benefits your spouse will receive if you die first.
If you die first, your spouse may receive a survivor benefit equal to the greater of the two benefits you and your spouse received (or benefits equivalent to what you would have received at full retirement age if you had not yet paid your checks). claimed).
This means that if you were the highest earner and you claimed benefits early, you would end up reducing the amount your spouse would otherwise get in survivor benefits. This can lead to financial disaster after you die, as your household income can drop 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 making an early benefit decision. Otherwise, you or your partner could end up very sorry.