Key Points
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You’re allowed to sign up for Social Security at any point once you turn 62.
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You’ll face a reduction in benefits for claiming before full retirement age.
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Permanently cutting your benefits could hurt you later in life, particularly if you end up living a long one.
One of the toughest financial decisions you might have to make in your lifetime is figuring out when to sign up for Social Security. Once you turn 62, those benefits are yours to claim whenever you want. And many people are happy to jump at the chance to get that money as soon as they can.
But if you’re considering an early Social Security claim, you may want to seriously rethink that idea. It’s a decision that could end up hurting you not just in the near term, but much later in life.
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The problem with claiming Social Security early
When we talk about filing for Social Security early, we mean signing up for benefits before reaching full retirement age. Social Security’s full retirement age is 67 for anyone born in 1960 or later. So whether you claim benefits at 62, 64, or even 65 in conjunction with signing up for Medicare, you’re filing early.
For each month you claim Social Security ahead of full retirement age, your benefits are permanently reduced. And the earlier in life you claim, the more substantial a reduction you face.
For example, signing up for Social Security at age 64 instead of 67 means facing a 20% hit. Signing up at 62 leaves you with a 30% reduction. And any reduction you face is permanent unless you manage to undo your Social Security claim within a year and repay the benefits you received in that time frame.
A lot of people enter retirement with little to no savings. Claiming Social Security early could leave you with much less monthly income on an ongoing basis, making it harder to keep up with your bills. But that’s not the only problem with claiming benefits early.
You might need the larger benefits later in life
Although some people retire with very small nest eggs, hopefully you’ll be in a different boat. But the longer you live, the greater the risk of eventually running out of money. And that’s where a reduced Social Security benefit could really come back to bite you.
Americans are living longer these days. Between the years 1900 and 2000, U.S. life expectancy increased from 51 to 80 for women and from 48 to 74 for men, according to the Population Reference Bureau.
What this means is that if you claim Social Security early, that could prove very problematic if you eventually deplete your savings and need your monthly benefits to live on. At that point, a 20% or 30% reduction, or even a much more minor reduction, could leave you cash-strapped.
Remember, too, that as you age, your healthcare needs are likely to increase. So having more guaranteed money each month is crucial.
Consider your filing decision carefully
Claiming Social Security before full retirement age isn’t always a poor decision. Just as larger monthly benefits could protect you financially if you live a long life, filing early could leave you with a larger lifetime Social Security benefit if you end up living a shorter life.
Of course, without a crystal ball, there’s no way to know. But if your health isn’t in good shape and your parents and grandparents all passed away in their mid-70s, then that could easily make the case for claiming Social Security early.
If your health is average or strong, though, and your family history is similar, then you may want to think twice about filing for Social Security before full retirement age. You might truly end up needing larger monthly benefits if you end up living longer than expected.
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