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Claiming Social Security Before Full Retirement Age? Answer These Questions First

By Maurie Backman – Dec 4, 2021 at 1:18AM

Key Points

  • You're entitled to your full Social Security benefit once you reach full retirement age.
  • It's possible to sign up for benefits much sooner, albeit at a reduced rate.
  • These questions could help you determine if filing early is the right move.

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It's important to think things through before signing up for benefits -- especially if you're claiming them early.

One great thing about Social Security is that you get choices when it comes to claiming benefits. You're entitled to your full monthly benefit, based on your earnings history, once you reach full retirement age, or FRA. That age is either 66, 67, or somewhere in the middle, depending on your year of birth.

You're allowed to sign up for Social Security before FRA -- as early as age 62, in fact. But doing so will result in a lower monthly benefit for life. You can also delay your filing past FRA and boost your benefits in the process.

Two people at table with laptop and documents.

Image source: Getty Images.

Many seniors wind up claiming Social Security before FRA to get their benefits sooner. And doing so could end up being a wise decision for you. But before you move forward with that plan, be sure to answer these key questions.

1. What reduction am I looking at?

The closer to FRA you are when you file for benefits early, the less of a hit those benefits will take. It's important to know exactly what sort of reduction you're looking at for taking benefits before FRA.

Essentially, you'll lose about 6.67% of your benefits per year for each of the first three years you file early, and then 5% per year after that. This means that if your FRA if 67 but you file at 66, your benefits will be reduced by just 6.67%. But if you file at age 62 with an FRA of 67, you'll be looking at a monthly benefit that's 30% lower.

2. Do I have enough savings to compensate for a reduced benefit?

If you're entering retirement with millions of dollars socked away in an IRA or 401(k) plan, then you may be in a solid position to cope with a reduced benefit -- even if you're talking about a 30% reduction. But if your savings aren't so robust, you may want to proceed with caution before shrinking those benefits for life.

Take a look at your nest egg and figure out how much of your savings you feel you can withdraw safely each year. Then figure out how much Social Security income you'll need to supplement those withdrawals, and make sure you're not reducing your benefit beyond what you need.

3. Have I really considered what retirement will cost me?

Some people claim Social Security before FRA under the assumption that the hit to their benefits won't really matter since retirement is such an inexpensive period of life. But you may be shocked to see what your monthly expenses come to once you retire.

Healthcare alone could eat up a huge chunk of your income, and even if your home is fully paid off by the time your career comes to an end, you'll still have to deal with maintenance costs, insurance, and property taxes. All told, your bills in retirement may be more than you initially bargained for, so make sure you're accounting for your actual cost of living before filing for Social Security at an age that will result in a lower monthly benefit.

To be clear, filing for Social Security ahead of FRA isn't always a bad thing. In some cases, it's a necessary thing, such as if you're forced to retire early due to health issues or a job loss. But before you make that call, consider these questions carefully. You may decide that you're better off waiting to file for benefits so you don't slash a critical income stream for the rest of your life.

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