When it comes to signing up for Social Security, you get a choice. You can opt to take benefits at full retirement age (FRA), which is when you get your complete monthly benefit based on your wage history, or you can sign up at an earlier or later age.
If you delay your filing beyond FRA, your Social Security benefits will increase on a permanent basis. But if you sign up before FRA, your benefits will be permanently reduced.
The extent of that reduction will depend on how early you sign up. The soonest you can file for Social Security is age 62, and if you go that route, you'll be looking at a 25% to 30% reduction in benefits, depending on your exact FRA. If you sign up for benefits at age 65, you'll be looking at a smaller reduction -- more like 6.67% to 13.34%, depending on your FRA.
But all told, claiming Social Security before FRA generally means locking in a lower benefit for life. And you might regret going that route if these factors apply to you.
1. When you don't have much retirement savings
If you have a generous nest egg, the income you get from Social Security may only be secondary. In that case, you may be in a position where you can potentially afford a hit to your benefits.
But if you don't have much money socked away for retirement, then you may need all the income you can get from Social Security. Filing early could put you in a tough position where you can't manage even your basic bills.
2. When you're still working
Once you reach FRA, you can earn any amount of money without it affecting your Social Security benefits. But if you claim benefits before FRA and are still working, you'll risk having some of that income withheld if your wages exceed the earnings-test limit.
That limit changes every year. In 2022, you can earn up to $19,560 a year without affecting your benefits. But from there, you'll have $1 in Social Security withheld per $2 of earnings above that threshold. So if you're still working, you might regret filing for benefits early because you may not get to keep them in full, but you'll still slash them due to not waiting until FRA.
3. When you live a long life
If you don't expect to live very long, then claiming Social Security ahead of FRA could make sense, since it could result in a larger amount of total lifetime income. But if you expect to live a long life, then filing early will generally mean shortchanging yourself on lifetime benefits as well as monthly benefits.
What's the right call?
Some people have no choice but to claim Social Security early, such as if they lose their jobs in their early or mid-60s and need the income. But if the above scenarios apply to you (or if you think they'll apply to you in the case of living a long life), then it could pay to wait until FRA arrives to sign up for benefits. Doing so could mean avoiding not just a reduction, but a world of financial stress to follow.