Should You Claim Social Security Early Due to Benefit Cuts?

The most recent report from the Social Security Trustees was a mixed bag. On a positive note, the Trustees pushed back the date at which the program’s trust funds are expected to run dry from 2034 to 2035, buying seniors one more year without having to worry about benefit cuts. But on a less positive note, those benefit cuts are still very much a possibility, given the program’s pending financial shortfall.

If you’re in the process of planning for retirement, one important decision to land on ahead of time is when to sign up for Social Security. But should you claim benefits early in light of potential benefit cuts?

Make the right call

There’s a good chance Social Security will end up being an important income source for you once you retire. And so it’s crucial that you do your best to land on the right filing age.

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The earliest you can sign up for Social Security is age 62. But doing so could mean slashing your benefits by virtue of signing up early.

For each month you file for benefits ahead of full retirement age (FRA), they get reduced permanently. And FRA doesn’t kick in until 66, 67, or somewhere in between, depending on your year of birth. So if you file for benefits at age 62, you can expect your monthly payments to be 25% to 30% lower than what they would’ve been at FRA.

Meanwhile, age 62 has long been a popular age to sign up for Social Security. But now, in light of benefit cuts, we could see even more seniors rush to file for Social Security as early as possible.

But that may not be the right call. As it is, seniors on Social Security may start losing upward of 20% of that income due to a universal reduction in benefits. That’s something that you, as an individual, won’t be able to prevent.

But what you can prevent is a further hit to your benefits by signing up to start collecting them at age 62. And if you’re coming into retirement without a lot of money in savings, it pays to consider claiming Social Security at a later age to help compensate.

Can benefit cuts be prevented?

To be clear, right now, Social Security cuts are merely a possibility. If lawmakers manage to find a way to pump more money into Social Security, those cuts may end up being avoidable.

But lawmakers are also running down the clock in that regard. After all, 2035 may seem far away, but in reality, it will take a lot of advanced planning to come up with a fix for Social Security’s financial problems. So for now, it’s best to assume that Social Security cuts will happen — and to let that information shape your retirement planning.

At the same time, while Social Security cuts may be inevitable, that doesn’t mean the program is going bankrupt. And if you file for benefits as early as possible in an effort to snag yourself more money, you might end up with a lot less income from Social Security in your lifetime.

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