Why 2023 Could Be a Great Year to File for Social Security Benefits Early

Retirees can opt into the Social Security program at different times of their lives. The full retirement age (FRA), which is when they are entitled to their full benefits, is 67 for those born after 1960.

Retirees can put off Social Security retirement benefits beyond FRA until as late as age 70 and receive more in monthly benefits to account for the years they delay it. The third option for retirees is to opt into the program early. Retirees can start claiming Social Security as soon as 62, although they usually take a significant haircut on their benefits in doing so.

While your decision of when to start claiming Social Security benefits should always depend on your health and financial status, 2023 could be a great year to file for benefits early. Here’s why.

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Keeping more of your earnings

When you take Social Security before FRA and you’re still working, the Social Security Agency (SSA) only allows you to make a certain amount in work earnings before it begins making deductions.

For instance, if you are below your FRA for the entirety of 2022, the SSA will begin taking back $1 in annual benefits for every $2 you make above the annual limit of $19,560. These reductions can add up.

However, if you started taking benefits early but would also have turned 67 this year, the SSA does deductions differently. In this scenario, the FRA would take back $1 in annual benefits for every $3 you earn above the threshold of $51,960. In 2023, these thresholds are rising due to some of the highest levels of inflation seen in four decades, which has resulted in the largest cost-of-living adjustment (COLA) to benefits in that time frame as well.

Next year, the limit for early filers who will not turn 67 in 2023 will rise to $21,240. That means early filers can earn $1,680 more before seeing deductions to their benefits. For early filers turning their FRA next year, the annual threshold is rising to $56,520. That means these filers could pocket an additional $4,560 more before reductions set in.

Assessing the political climate

Another potential reason for filing for benefits early is concerns about the ability of the Social Security program to keep funding full benefits due to the solvency of its trust funds.

The Old-Age, Survivors, and Disability Insurance (OASDI) program, which pays out benefits to program participants, has been burning through its reserves because benefit expenses have exceeded the revenue the program collects from payroll taxes. The fund’s reserves, according to the SSA, are expected to be depleted by 2034. At that time, incoming revenue from taxes will only be able to fund 80% of scheduled benefits.

Since that event is really only 12 years away, lawmakers in Washington are trying to come up with a solution, but Social Security is a very divisive issue in Washington, D.C., largely because it is likely going to involve a tax hike or cuts to the program. While I suspect something will eventually get done, you just never know, especially with how partisan politics have become. The easiest way to ensure you get the most amount of benefits possible is to start claiming them as soon as possible, even if it involves taking a haircut.

The biggest factor to consider

Next year could definitely be a great time to file for benefits early because even if you’re still working, you can pocket more in work income before seeing reductions, and, well, because you guarantee that you’ll be able to claim all the benefits you are entitled to for the next roughly 12 years.

But this definitely doesn’t mean you absolutely should take benefits early. When deciding whether to claim benefits early, you should really be thinking about how to maximize your benefits for your elderly years and ensure you have enough savings to last you the rest of your life.

This means assessing where you’re at from a financial and health perspective. For instance, if you are 62, healthy, and have solid earnings and savings, it probably makes sense to hold off on taking benefits. There is certainly not a one-size-fits-all solution.

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