When it comes to signing up for Social Security, you get choices. You can file for benefits as early as age 62. But you're not entitled to your full monthly benefit until full retirement age (FRA), which kicks in at 66, 67, or 66 and a certain number of months.
If you claim Social Security ahead of FRA, you'll face a reduction in benefits, the extent of which will hinge on how early you file and what your precise FRA is. But if you sign up to get benefits at 62, you'll face a 25% to 30% hit -- for life.
But while you may be aware that claiming Social Security early will result in a reduced benefit, you may not realize the consequences that might ensue when your retirement income suddenly shrinks. Here are just a few things that might happen if you file for Social Security ahead of FRA.
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1. You might struggle to cover your healthcare costs
The average healthy 65-year-old couple retiring in 2021 can expect to spend 68% of their Social Security benefits on healthcare costs alone, reports HealthView Services. But if you shrink your benefits, you might have to skimp on healthcare. And that's not a good thing to do later in life.
Unfortunately, many seniors today are forced to make hard choices like forgoing specialist visits and skipping medication because they simply don't have the money to pay for those things. If you want to avoid a similar fate, you may want to hold off on claiming Social Security until at least FRA.
2. You might be forced to go back to work
Some seniors enjoy part-time work in retirement. But if that's not part of your plan, then you may want to pledge to hold off on Social Security until FRA. If you file early, you could wind up having to work in some capacity to make up for that lost income.
Furthermore, while some seniors manage to find jobs that are fulfilling and not too demanding, that's not guaranteed to be your experience. So if the idea of having to return to a desk job or work retail sounds unappealing, then you may want to sit tight on Social Security and not rush to file.
3. You might end up bored senseless
Going from a full-time work schedule to no job at all can be a big adjustment. And it's important to find ways to fill your days so you don't get bored -- and depressed -- during retirement.
But if you claim Social Security early, you'll have even less income at your disposal to spend on leisure. That means that instead of spending your newfound free time visiting museums, enjoying the theater, and dining out with friends, you might instead be forced to largely stay home, eat leftovers, and entertain yourself with books and TV.
To be clear, relaxing at home isn't a bad thing. But you may not want to be stuck doing it 10 hours or more a day.
File for benefits carefully
It's within your power to snag a higher Social Security benefit or a lower one. If you're entering retirement with limited savings and you know you'll be reliant on Social Security to cover many of your expenses, then it pays to consider waiting to file until you reach FRA.
You might even decide to delay your filing past that point and grow your benefits in the process. For each year you hold off on claiming Social Security past FRA, your benefits grow 8%, up until age 70. And that's a nice way to buy yourself more financial freedom during retirement.
