The biggest choice that each potential Social Security recipient faces is when to claim benefits. The program provides a baseline of what it calls full retirement age, and if that's when you claim, then you'll receive a base amount of monthly benefits tied to your work history. In general, the more money you've made during your career, the higher your monthly Social Security check will be.
However, many people decide not to wait until their full retirement age (FRA) to take their Social Security benefits. The Social Security Administration is actually quite flexible on that front, but the earlier you start getting benefits, the smaller they'll be. Here are the specifics on calculating just how big a hit your checks will take if you make an early Social Security claim.
The cost of claiming worker benefits early
Exactly how much you lose from claiming Social Security early depends on what type of benefit you're receiving and how early you claim. For every month prior to FRA that you claim retired worker benefits based on your own work history, up to 36 months, the reduction in your monthly check will be 5/9ths of a percentage point.
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So for someone whose FRA is 67, claiming at 66 and three months would cost you 9 times 5/9ths of a percentage point, or 5% of your monthly check. Claiming at 65 and six months would lead to a 10% reduction, while claiming at 64 results in a 20% cut.
Beyond 36 months, the reduction for each additional month you claim early is smaller. For months 37 to 60, the per-month cut is 5/12ths of a percentage point. So for those claiming four years early at 63, the reduction is 36 times 5/9ths of a percentage point plus 12 times 5/12ths of a percentage point. The net result is a 25% reduction in your benefits from the FRA amount.
Because each person's baseline benefit is different, coming up with a dollar figure will depend on your individual situation. However, your Social Security statement can give you a good idea of how much you'll receive at various ages, depending on when you claim.
The cost of claiming spousal benefits early
As if you hadn't already seen enough fractions for one day, the Social Security Administration has a different set of rules for spousal benefits. For the first 36 months, the reduction in spousal benefits from what you'd receive at FRA is 25/36ths of a percentage point. That's a bit more than the reduction for worker benefits. Claiming at 65 and six months instead of 67 would cut your spousal benefit by 12.5%, while claiming at 64 results in a 25% cut.
Beyond 36 months, the same 5/12ths of a percentage point rule applies. So those claiming at 62 would see a maximum cut of 35%.
Further complicating matters is the fact that the spousal benefit is already calculated as one-half of the primary worker's retirement benefit. So if you'd normally receive 50% of your spouse's retirement benefit in spousal benefits, a 35% reduction results not in getting 15% of your spouse's benefit, but rather 32.5%.
The cost of claiming survivor benefits early
Yet another set of rules applies to surviving spouses seeking survivor benefits. Here, there's just one monthly factor, and it depends on your birth year and full retirement age.
For those with a FRA of 67, the per-month reduction is 0.339 percentage points. Because most surviving spouses can claim survivor benefits as early as 60, claiming the maximum of seven years early results in a reduction of 84 months times 0.339 percentage points per month, or roughly 28.5%. That's consistent with the general rule that says survivors are entitled to receive at least 71.5% of their FRA benefit even if they claim early.
Know what you're giving up
There's a lot of advice out there about whether you should claim Social Security early or wait until your full retirement age. Yet all that general guidance isn't as valuable to you as figuring out exactly what you're giving up in dollars and cents by making your Social Security claiming decision. Only then can you make a truly informed choice and fully understand the pros and cons of each option.
