Taking Social Security Early: Pros and Cons

If you’re eligible for Social Security benefits, you’ll have a choice of when to start collecting them: early (as soon as age 62), at your “full” or “normal” retirement age (65 to 67, depending on the year of your birth), or late (up to age 70). This article explains the pros and cons of claiming your Social Security benefits early.

Taking Social Security Early: An Overview

The Social Security Administration calculates your monthly benefit based on several factors, including how much you’ve paid into the system over the years and when you decide to start collecting benefits. If you claim benefits at your “full” or “normal” retirement age, as Social Security defines it (see table below), you’ll receive your “full” benefit.

But you can also start claiming as early as age 62, in return for a permanently reduced benefit, as shown in the table below.

On the other hand, if you wait past your full retirement age to collect benefits, you’ll receive credits for each month you delay, up to age 70. These credits will increase your monthly payment by two-thirds of 1% for each month that you wait—or 8% a year.

Which option is right for you? Here are some advantages and disadvantages to consider if you’re weighing whether to claim your benefits early.

The Advantages of Taking Social Security Early

There are a number of reasons you might consider taking Social Security benefits before you reach full retirement age.

1. You need the money now

Many Americans claim their Social Security benefits early for a simple reason: They need the money to cover their everyday living expenses. During the recession years of 2008 to 2009, for example, close to 36% of eligible men and 39% of eligible women started claiming benefits at age 62.

2. You want the money now

Even if you don’t need your benefits early to support yourself, you may have other reasons for wanting to take them as soon as possible. Some people, for example, are concerned that Social Security may be unable to meet all of its obligations in the future, so they might as well get theirs now. Others believe they could do better by collecting benefits and investing them, rather than leaving it in the government’s hands.

That said, you would have to be a skilled (or lucky) investor to beat the 6% to 8% guaranteed annual return on your money that Social Security offers to those who wait until full retirement age or later.

3. You’re in poor health and fear you won’t be around to collect later

If, unfortunately, you don’t expect to live long enough to profit from delaying your benefits, your wisest course may be to take them sooner rather than later. Even if you were to receive a much bigger benefit by claiming at age 70, for example, you could be well into your 80s by the time you’d come out ahead in terms of the total benefits you’ve received. Financial planners refer to this as your breakeven age.

The Disadvantages of Taking Social Security Early

Of course, claiming your benefits early also has some downsides.

1. Your benefits will be permanently reduced

As we’ve mentioned, claiming your benefits early means they will be reduced on a permanent basis. For example, as the table above illustrates, someone born in the 1960s or later who takes their benefits starting at age 62 will get 30% less each month for the rest of their lives than if they’d waited until their full retirement age of 67.

2. Your cost-of-living adjustments will be smaller too

In addition to receiving a smaller monthly benefit than if you’d waited until full retirement age, you’ll get less on a dollar basis from any future Social Security cost-of-living adjustments (COLA). For example, beneficiaries are slated to receive a 5.9% increase in 2022. A beneficiary born between 1943 and 1954 who currently receives a “full” monthly benefit of $2,000, for example, will be getting an extra $118 each month. But had that same beneficiary started taking Social Security at age 62, their benefit would have been reduced by 25%, to a current $1,500, and they’d get a COLA of just $88.50 a month. And, because of the effects of compounding, the difference between the two benefits will continue to widen year after year.

3. You’ll be penalized if you work

Before you reach full retirement age, any money you earn from a job can affect your Social Security benefits. In 2022, for example, Social Security will deduct $1 from your benefits for each $2 you earn above $19,560. (If you turn full retirement age in 2022, it will deduct $1 from your benefits for each $3 you earn above $51,960 until your birthday month.) You will get the money back later after you reach full retirement age, but in the meantime, you’ll have that much less to spend.

Special Considerations

What if you claim benefits early but then regret it? In some circumstances, the Social Security Administration offers the opportunity for a do-over.

In a process called a withdrawal, you can cancel your application for up to 12 months after you became entitled to retirement benefits. You will also have to repay any Social Security benefits you received, including any money that was withheld from your benefits to pay Medicare premiums.

After withdrawing your application you can reapply for benefits later, at a time of your choosing. Note that you can only do this once in your lifetime.

The Bottom Line

You can begin collecting your Social Security benefits as early as age 62, but you’ll get smaller monthly payments for the rest of your life if you do. Even so, claiming benefits early can be a sensible choice for people in certain circumstances.