One of the more significant choices you'll make regarding retirement is when to claim Social Security benefits because it impacts how much you'll receive from a key income source. Your full retirement age (FRA) is the age at which you're eligible to receive your full Social Security benefit -- but you don't have to wait until then to claim.
You can claim benefits as early as age 62, but doing so before reaching your full retirement age will reduce your monthly payout. Still, some people find it better to claim benefits early because they'd rather have the income sooner. If you're considering claiming benefits early in 2024, here are three things to know beforehand.
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1. Earning too much could temporarily reduce your benefit
Claiming Social Security benefits doesn't mean you have to stop earning money. Plenty of people work while claiming Social Security. However, if you claim benefits early and earn over a certain amount, your monthly benefits could be temporarily reduced.
Social Security uses a Retirement Earnings Test (RET), which reduces benefits if you claim before FRA and your work earnings exceed a maximum threshold. In 2024, the most you can earn while claiming Social Security benefits early is $22,320 without being subject to the RET, unless you'll reach your FRA at some point during the year. If you'll reach your full retirement age in 2024, the most you can earn in the months before you turn your FRA is $59,520.
People in the former group will have benefits reduced by $1 for every $2 over the limit, and people in the latter group will have annual benefits reduced by $1 for every $3 over the limit. When benefits are reduced, however, the money isn't gone forever. Social Security withholds it until you reach your full retirement age and then recalculates your benefit to gradually add it back over time.
2. Spousal benefits are also affected by when you claim
Social Security spousal benefits allow married people to receive benefits based on their spouse's work record instead of their own. This can result in higher payments if your spouse earned considerably more than you did throughout your working lives.
The reductions for claiming spousal benefits early are larger than those for claiming regular retirement benefits. Retirement benefits get reduced by 5/9ths of 1%, or about 0.56%, for every month you claim early up to 36 months, and 5/12ths of 1% per month beyond that. Spousal benefits, however, get a slightly larger reduction of 25/36ths of 1%, or about 0.69%, per month up to 36 months, and the same 5/12ths of 1% for every additional month.
3. Here's a look at the breakeven age between claiming at age 62 and 67
Your breakeven age is an important number to know. It's the age at which the total amount of Social Security benefits received from claiming at one age equals the total amount from claiming at another age.
As an example, say someone's full retirement age is 67, and they decide to claim at 62, reducing their monthly benefit from $1,500 to $1,050. Below are the total amounts they would receive by different ages, depending on when they claimed:
| Claiming Age | Monthly Benefit | Amount Received by 75 | Amount Received by 80 |
|---|---|---|---|
| 62 | $1,050 | $163,800 | $226,800 |
| 67 | $1,500 | $144,000 | $234,000 |
Calculations and chart by author.
By age 75, someone claiming at 62 would have received more overall than by claiming at 67. However, by age 80, the roles would be reversed: Someone claiming at 67 would've received more than by claiming at 62. In this scenario, the breakeven age is right around 78 1/2. At that point, claiming at 62 would've led to $207,900 in total benefits, while claiming at 67 would've led to $207,000.
Knowing your breakeven age can help you decide if claiming Social Security early is worth it. Consider it along with other factors, like health and life expectancy, retirement income sources, and current financial needs.
