You've worked hard your entire life, and now that you're finally old enough to claim Social Security, it makes sense that you don't want to wait any longer to start cashing in those checks. As long as you're at least 62 and have the necessary work history to qualify for retirement benefits, there's nothing standing in your way.
But if you're still employed, claiming Social Security might not provide the lifestyle boost you were hoping for -- at least not right away.
Image source: Getty Images.
What happens when you claim Social Security early while you're still working
Claiming Social Security early doesn't just mean applying right at 62. If you're receiving checks and are under your full retirement age (FRA) -- 67 for those born in 1960 or later -- you're claiming early. This could reduce your monthly benefit by up to 30%.
It could also put you at risk of encountering the earnings test if you're still working. This little-known rule could further shrink your Social Security checks.
Those under their FRA for all of 2026 lose $1 from their benefits for every $2 they earn over $24,480 from their jobs this year. If you'll reach your FRA in 2026, you lose $1 for every $3 you earn over $65,160, assuming you earn that much before your birth month.
This could wipe out your entire benefit in some months, depending on your salary and your Social Security benefit. For example, say you'll be under your FRA all year. You qualify for the $2,075 average monthly benefit, and you earn $75,000 from your job. That's $50,520 more than the $24,480 limit. That's enough to wipe out your benefits for the entire year.
The silver lining
Money lost to the earnings test isn't forfeited forever. When you reach your FRA, the Social Security Administration increases your benefit to make up for what it withheld before. If you lost an entire year's worth of checks, it will treat you as if you signed up a year later than you actually did. This leads to larger monthly benefits for the rest of your life.
Once you hit your FRA, you can also earn as much as you want from your job without worrying about the earnings test. However, a higher income could increase your risk of Social Security benefit taxes.
If you think the earnings test is going to be a problem for you and you don't need the money right away, you may prefer to delay your Social Security application until you're ready to retire. Every month you wait to apply boosts your benefit, and this could give you a larger lifetime benefit that you can use to supplement your personal savings.
