Choosing when to begin taking Social Security is one of the most important retirement decisions you'll make, and it will affect your monthly income for the rest of your life.
By claiming sooner than your full retirement age (which is age 67 for everyone born in 1960 or later), your benefit will be permanently reduced by up to 30%. You can also delay benefits up to age 70 to earn a bonus of at least 24% on top of your full payments.
Many soon-to-be retirees put a lot of thought into this decision, researching all of their options and weighing the pros and cons of each choice. But when it comes to actually claiming, there's an alarming trend among older adults.
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The decision may not be in your control after all
In an ideal world, all major life decisions would be fully within one's control. But many people don't have that luxury, and Social Security decisions are no different.
When asked why they chose to take benefits at the age they did, 47% of current beneficiaries said it was due to life events outside of their control, according to a 2024 survey from the Nationwide Retirement Institute. The most common reasons were health issues and financial struggles, while others admitted that job loss was the reason they began taking benefits.
In fact, it's more common for people to file for these reasons than for planned purposes. While 23% of survey participants said they chose their claiming age as part of their overall retirement plan, 26% said they filed after facing health or financial challenges.
This can be alarming news for many older adults, especially if Social Security is a major part of your retirement plan. If you end up claiming sooner than expected for reasons outside your control, it could wreak havoc on your finances.
Just how much will claiming early affect your benefit?
The difference between claiming early and delaying benefits may not seem like much, but it can seriously affect your monthly finances.
According to December 2023 data from the Social Security Administration, the average 70-year-old retired worker collects around $2,038 per month in benefits. At ages 67 and 62, those averages are just $1,884 and $1,298 per month, respectively.
Claiming even a year or two early can reduce your monthly benefits by hundreds of dollars. If Social Security is going to be a significant source of income in retirement, it pays to have some backup plan in case you have to file earlier than expected due to health issues, financial challenges, job loss, or other life events.
What can you do right now?
Of course, there's no way to know whether life will throw curveballs at you. But you can play it safe and assume you may need to take Social Security earlier than expected.
Perhaps the best thing you can do now is reduce your dependence on your benefits. Social Security can still be an important part of your retirement plan, but the more cushion you can create outside your benefits, the less your claiming decision will affect your financial health.
This could involve beefing up your savings, for example, or setting up a source of passive income to pad your nest egg. You could even consider more drastic measures like downsizing your home or moving to a more affordable area to cut costs and help your savings go further.
Life can be unpredictable, and it could always throw a wrench in your plans, no matter how prepared you are. But if you're at least considering the possibility of being forced to claim Social Security earlier than expected, you can take steps to keep your retirement as safe as possible.
