Please ensure Javascript is enabled for purposes of website accessibility

This Social Security Move Could Help You Avoid a 30% Reduction in Benefits

By Maurie Backman – Oct 9, 2021 at 6:36AM

Key Points

  • You may end up relying heavily on Social Security during retirement.
  • Filing at the wrong time could leave you with a much lower benefit for life.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Many seniors can't afford a massive hit to their benefits. Can you?

Millions of seniors routinely rely on Social Security to cover many of their retirement expenses. Ideally, you'll be kicking off your golden years with money outside of Social Security -- perhaps a pension, or a nest egg housed in an IRA or 401(k) plan.

But either way, your goal may be to get as much money out of Social Security as possible. And one key move on your part could prevent you from slashing your benefits by 30% on a permanent basis.

Two seniors at table with laptop and documents in front of them.

Image source: Getty Images.

Being patient can really pay off

Many seniors rush to claim Social Security at age 62 because that's the earliest age to sign up for benefits. But if you file the moment you're able to, your benefits will take a serious hit -- for life.

See, you're not entitled to your full Social Security benefit until you reach what's known as full retirement age, or FRA. FRA hinges on your year of birth, as follows:

Year of Birth

Full Retirement Age




66 and 2 months


66 and 4 months


66 and 6 months


66 and 8 months


66 and 10 months

1960 or later


Data source: Social Security Administration.

If you file for Social Security at age 62 with a FRA of 67, your monthly benefit will shrink by 30%. And unless you manage to undo your filing (a tricky process that involves repaying all the money you received in Social Security within 12 months of your initial claim), you'll be stuck with that lower benefit for life.

Here's how that might play out. Say you're entitled to $1,559 a month in Social Security, which is what the average beneficiary receives today. If you're eligible for that $1,559 at age 67 but you claim benefits at 62, you'll receive $1,091 a month instead.

That reduction may not be a big deal if, say, you're sitting on a $2 million nest egg and have the option to take large withdrawals from it. But if Social Security is your primary source of retirement income, then cutting your monthly benefit by $468 is probably something you don't want to do. On an annual basis, that means reducing your income by $5,616.

Of course, some people have no choice but to file for Social Security as early as possible. If you lose your job in your early 60s, claiming benefits at 62 may be your only option for paying your bills. Similarly, if health issues push you out of the workforce, taking benefits at 62 could become essential, whether you want to file early or not.

But if you have the ability to avoid claiming your benefits early, it could really pay to wait until FRA to file. Doing so could lead to a lot more financial security for many years.

In fact, in some cases, it could pay to delay your filing beyond FRA. For each year you hold off, your benefit will grow 8%.

There's no sense in delaying your filing past age 70, because at that point, you can't raise your benefit any more. But if you've landed in a situation where you'll depend heavily on Social Security, then it pays to not only avoid a 30% reduction in benefits, but also to set yourself up for as large an increase as possible.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.