Let’s assume you’re able to retire early (age 62) and have heard anecdotes of retirees being able to take their Social Security well before the full retirement age (FRA). Should you take it now? What are the pros and cons?
Below, we present some basic information, as well as some items to look out for to help weigh the pros and cons to make a well-informed decision for your situation.
Starting to receive Social Security benefits at age 62 can provide immediate income, but it does cut into the full benefits you would normally receive at FRA. It’s extremely important to consider your needs (health, income, life expectancy, etc.) because if you can wait until FRA or even the higher-paying age 70, this will give you much higher benefits.
If you file for Social Security before you reach FRA (67 for most people still working today), the amount of your payments is reduced for every month that you file early. If you start taking benefits at 62, which is the earliest you can file for benefits, your total payout will be reduced by about 30%. First, that is quite a bit to forgo. Second, these reductions happen whether or not you are working when you take the early benefits.
Filing early may be a decision that is necessary for some for a few reasons – health issues, you are fully done working, your cash need is urgent, or maximizing spousal benefits. But, if you expect to live a long life throughout retirement (late 80’s or above), and you can still keep working, filing early may not be the most efficient use of Social Security. And, keep in mind, once you file, you have irreversibly locked in your benefits – at the lowest possible amount.
In the case for waiting to file for your benefits each month you delay filing for Social Security past your FRA increases your payout by about 8% per year — until you hit 70, at which point you would have maximized your payout. Delaying filing for benefits is a very positive decision if you live longer than the average person. In this case, it may make sense to wait until you turn 70 to file for Social Security benefits.
What is the ‘test’ used to reduce your Social Security benefits if you file early?
On the Social Security website, there is a Retirement Earnings Test Calculator. If you work or plan to work, are under your FRA, and would like to file for Social Security early, this calculator will help you estimate benefit reduction. There is only so much you can earn before your Social Security benefits are reduced.
What is the earnings amount?
For 2025:
- If you are under the FRA, for every $2 you earn over $23,400, your annual benefit is reduced by $1.
- If you will reach your FRA any time in 2025, the earnings limit is $62,160, and your benefit would be reduced by $1 for every $3 you earn over that limit.
After you reach your FRA, the earnings test no longer applies, and the Social Security Administration recalculates the benefit. One very important piece here: in those years that you are subject to the earnings test, Social Security could take your entire benefit check if your employment income is too high.
If you wait to file for Social Security benefits until your FRA, you will get a fewer number of payments, but they will be much larger. In the end, all being equal, you would come away with more benefit dollars.
If you haven’t applied for benefits, it’s worth your time (and money) to weigh the pros and cons to see if they can help you make a decision about your filing date. You can always put off filing for a bit, but making a rash or emotional decision to file early could cost you money.
Remember, it’s your money.
Let’s maximize it!