Social Security is a lifeline for millions of seniors today, and the decision to claim benefits is a big one. Though your benefits themselves are calculated based on how much you earned during your 35 highest-paid years of income, the age at which you file for them can alter that number. If you claim Social Security at full retirement age, you'll get the exact monthly benefit your earnings history entitles you to. That age is either 66, 67, or 66 and a specific number of months.
However, the Social Security Administration will allow you to claim benefits as early as age 62. In doing so, you'll clearly get your money sooner, but you'll also reduce your benefits, and most likely on a permanent basis.
How bad a hit are we talking? Your benefits will shrink by 6.67% a year for the first three years you file early, and by 5% a year for each year thereafter. This means that if your full retirement age is 67, filing at 62 will result in a 30% reduction in benefits.
That's why many seniors are advised to avoid filing for benefits early. On the other hand, here are a few scenarios where claiming Social Security early actually makes sense.
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