Social Security is a crucial part of retirement planning, and deciding when to start claiming your benefits can make a big difference in your financial future. While it may seem tempting to claim your Social Security benefits as soon as you turn 62, this decision might cost you more in the long run.
Claiming early could reduce your monthly checks and even cause some complications down the road. Let’s break down three key reasons why claiming Social Security too early could hurt your finances.
1. Early Claiming Reduces Your Monthly Payments
The most straightforward downside of claiming Social Security at age 62 is that it reduces the amount of money you’ll receive each month. When you reach full retirement age (FRA), which is 67 for most people today, you qualify for your full benefit. If you claim benefits before your FRA, your monthly payment will be permanently reduced.
For example, if your monthly benefit at FRA is $2,000, claiming at 62 could reduce that amount to just $1,400. While you’ll start receiving benefits sooner, you’re getting a smaller check each month. Even though there might be a cost-of-living adjustment (COLA), the increase is smaller for those claiming early. So, if your $2,000 benefit gets a 3% COLA, it increases by $60, bringing it to $2,060. However, the $1,400 benefit would only increase by $42 per month, so the gap gets even wider over time.
2. Withholding of Benefits Due to the Earnings Test
Another important factor to consider is the Social Security earnings test. If you claim your benefits before reaching your FRA and still earn an income from a job, your Social Security benefits may be withheld. The amount of money withheld depends on your age and how much you earn.
For example, in 2025, if you earn more than $23,400 while under FRA, you will lose $1 of Social Security benefits for every $2 you earn over this limit. However, if you reach FRA during the year, the reduction drops to $1 for every $3 you earn over $62,160.
This could be problematic if you’re still working and depend on Social Security to cover some of your living expenses. In some cases, your monthly benefit could be significantly reduced or even eliminated temporarily.
The good news is that this money is not permanently lost. Once you reach your FRA, Social Security will adjust your benefits to make up for the reductions during the earlier years. This means that you could see a larger monthly payment once your FRA kicks in, depending on how much was withheld during the years you were working.
3. Delaying Benefits Could Help Avoid These Issues
While it may seem like the best option to claim early, especially if you’re eager to start receiving checks, delaying your claim could help avoid some of the drawbacks discussed above. If you wait until you retire or reach your FRA, you can avoid the earnings test and the reduction in monthly benefits.
Once you reach FRA, the earnings test no longer applies, no matter how much you earn. So if you plan to continue working or want to avoid reducing your Social Security benefits, it might be a good idea to hold off on claiming until you reach FRA.
Additionally, if you wait to claim your benefits, your monthly check could be higher because you will not face the permanent reduction associated with claiming early. The longer you wait to claim, the larger your monthly payment will be.
A Social Security Bonus You May Not Know About
If you’re worried about not having enough money saved for retirement, there’s a little-known “Social Security secret” that could help boost your benefits. Many retirees overlook this, but it could mean an extra $22,924 in your retirement income each year.
By learning how to maximize your Social Security benefits, you could increase your monthly payments and retire more comfortably. For example, if you claim your Social Security benefits strategically and delay your claim, you may qualify for higher payments once you reach FRA.
Conclusion
Deciding when to claim Social Security benefits is a big decision. While claiming early at age 62 gives you more checks over your lifetime, it comes with several downsides, including reduced monthly payments and the earnings test. Before you rush to submit your application, consider the long-term effects of claiming early. It might be worth it to wait until you reach your full retirement age or even later to maximize your benefits and avoid penalties.
Disclaimer: This article has been meticulously fact-checked by our team to ensure accuracy and uphold transparency. We strive to deliver trustworthy and dependable content to our readers.
Jon King is an experienced journalist with 3 years of experience in the field. With a strong background in investigative reporting, Jon is known for his in-depth coverage of crime news, finance news, local news, and USA news. Currently working with Mikeandjonpodcast, Jon brings his sharp investigative skills, where he provides timely updates and analysis on a wide range of topics. His commitment to delivering accurate and impactful news has earned him a reputation for providing insightful and comprehensive stories that resonate with his audience.
