After you've been paying Social Security taxes from every paycheck, retirement is a time to reap the fruits of your labor and begin receiving your benefits. The amount of your benefits depends mainly on how much you've earned through your career and when you decide to take benefits. You can begin claiming Social Security benefits as early as age 62, but your baseline amount -- the amount of your monthly benefits at different ages -- is based on your full retirement age (FRA).

To determine your full retirement age, Social Security uses your birth year:

Birth Year Full Retirement Age Months Between Age 62 and Full Retirement Age
1943 to 1954 66 48
1955 66 and 2 months 50
1956 66 and 4 months 52
1957 66 and 6 months 54
1958 66 and 8 months 56
1959 66 and 10 months 58
1960 or after 67 60

Data source: IRS.

If you're able to survive in retirement without having to claim Social Security, it may be worth it to delay your benefits until your FRA. Here's why.

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Taking your Social Security benefits early

If you choose to take your Social Security benefits before your FRA, they will be reduced monthly depending on how far from your FRA you are. Benefits are reduced by five-ninths of 1% for each of the first 36 months you claim before your FRA. If you begin taking benefits more than 36 months before your FRA, any months over 36 will reduce your amount by five-twelfths of 1% each month.

For perspective, if your FRA is 67 and you begin taking benefits at 62, your benefits would be reduced by 30%. You can also choose to delay your benefits until your turn 70, which will increase your monthly payout. For 2022, here are the maximum payout amounts based on retirement age:

  • Age 62: $2,364
  • Full Retirement Age: $3,345
  • Age 70: $4,194

Retiring early could cost you

Even though those figures are the maximum allowed, you're likely not going to receive that as your benefit. Of the 47.8 million Americans currently receiving Social Security benefits, the average monthly payout is $1,667.

If you were eligible for the average payout and began taking benefits at 62, your monthly benefits would be reduced by nearly $500 (assuming your FRA is 67). When you account for an average $500 monthly reduction over the 60 months between ages 62 and 67, it could cost you around $30,000 total.

For many people, Social Security alone won't be enough to survive solely in retirement; it should serve as more of a supplement, especially if you follow the 80% rule, which states you should aim to have 80% of your pre-retirement income in retirement to maintain your current lifestyle. So, if you currently make $80,000, you should aim to have $64,000 annually in retirement.

Having other sources of retirement income -- such as a 401(k), IRAs, or dividend-paying stocks -- should always be the goal, but it becomes even more important if you take Social Security benefits early because of the reduction.

If you plan for retirement from multiple angles, you'll be sure to put yourself in a better position to enjoy the retirement you deserve without the problems of finances hanging over your head.