You may feel the reasons to take Social Security early outweigh the disadvantages, and you'd be correct, but only under certain circumstances. A record number of people will retire in 2024, with four million Baby Boomers turning 65. Although experts say it's often better to wait to claim your Social Security benefits, many Americans opt to take their benefits early.
The Social Security program began during the Great Depression as a form of social insurance to address ongoing poverty rates among senior citizens. The Social Security Act, part of Roosevelt's New Deal, was enacted on August 14, 1935, when lawmakers set the retirement age at 65. It stayed that way until Congress overhauled the system in 1983 and gradually raised the full retirement age to 67 for those born in 1960 or later.
About 27.3% of working Americans claimed Social Security benefits at age 62, according to a Bankrate survey that analyzed 2022 claims. Just over 13% took Social Security at age 65, when many born before 1960 hit full retirement age, while 24.7% took it at age 70 when the monthly benefit can no longer be increased by waiting.
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So, what is the best age to file for benefits, and when does it pay to take Social Security benefits early?
Reasons to take Social Security early
1. Health issues
You are eligible to collect your full retirement benefit — 100% of the amount you’re entitled to receive based on lifetime earnings — at full retirement age (FRA). Full retirement age varies based on when you were born. The most recent age group to reach FRA were those born in 1957, as they turned 66 and 6 months in 2023. The FRA increases gradually to age 67 for people born between 1957 and 1960. FRA is 67 for all people born in 1960 and later.
However, if you’re in poor health, you may fear you won’t reach full retirement age and decide to take your benefits early instead. This may be especially true if you’re single and don’t have to worry about the impact on your surviving spouse.
2. You no longer want to work
It's not hard to believe that the average person spends 13 years and two months at work during their lifetime, according to the HuffPost. If you have a physically taxing job, it may seem even longer. A 2023 study by the Economic Policy Institute revealed that one in two workers over age 50 work in unhealthy or hazardous conditions, or have jobs that are physically draining. If this is the case, you may no longer be willing or able to work, and instead of remaining on the job, may choose to draw Social Security early.
3. You need cash now
With the rising cost of living, you may decide to claim your Social Security benefits early. In the Great Recession of 2008 to 2009, nearly 36% of eligible men and 39% of eligible women started claiming benefits at age 62 for one simple reason — to pay the bills. In 2021, that number fell to 30% of eligible seniors, but it's high enough to indicate that many retirees depend heavily on Social Security to make ends meet.
4. You need to cover expenses and get out of debt
It’s possible your current living expenses may surpass your Social Security benefit amount, so you decide to take your benefits early because you can’t wait for a larger payout later. Or, you’re drowning in debt, and taking benefits now will help. You may also feel you could do better by collecting your benefits early and investing that money. While that may appear logical, your investment must beat the 6% to 8% guaranteed return on your money that Social Security provides if you retire at full retirement age.
5. You fear benefits will dry up
The world is changing, and you may simply fear that Social Security will run out of money around when you reach full retirement age. This may be true even if you understand you’ll receive a larger benefit if you delay claiming social security. Fear can be a driver in decisions, and if this is you, claiming benefits early may be practical.
Reasons not to take Social Security early
In contrast to all the reasons to take Social Security early, there are also several reasons to wait.
1. Benefits are permanently reduced
The earliest age you can start taking Social Security retirement benefits is 62. But, your Social Security benefits are reduced by 30% if you retire at 62. That means you will receive just 70% of your full retirement benefit every month for the rest of your life.
If you claimed your benefit early and have changed your mind, you have a narrow window to stop and restart Social Security benefits.
2. Smaller cost-of-living adjustments
By taking your Social Security benefit early you will receive a smaller monthly benefit than waiting until your full retirement age. You will also get less from future Social Security cost-of-living adjustments (COLA). For instance, the earnings limit for people who have not reached their “full retirement age” in 2024 is $22,320. On the other hand, the earnings limit for people reaching full retirement age in 2024 is $59,520.
3. Penalty for working
The money you earn from a job before reaching full retirement age can affect your Social Security benefits. In 2023, Social Security deducted $1 from benefits for each $2 earned over $22,320. If you turn full retirement age, Social Security deducts $1 from benefits for each $3 earned over $59,520 until you turn the full retirement age. Although you will get your money back after you reach full retirement age, you won’t have as much to spend in the meantime.
4. Maximizing spousal benefits
If you’re married, you may want to consider how claiming Social Security early will affect your spousal benefits. First, when you file for retirement benefits, your spouse is typically eligible for a benefit based on your earnings, which can be half of your primary benefit amount — depending on your age at retirement. So, if your spouse begins receiving benefits before "normal (or full) retirement age," they will receive a reduced benefit.
Bottom Line
When it comes to Social Security, there are pros and cons to taking your benefits early. While it can cover expenses now and come in handy if you're not in the best of health, Social Security is not meant to replace the income you earn from a job. In fact, Social Security benefits typically only amount to about 40% of your average earnings, and if you file early, you’ll be permanently locked into a lower benefit.
One last thing. Before making any final decisions about taking your Social Security benefits early or postponing them until later, consider consulting with a financial adviser who can help you determine the best option for your financial needs.
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