Should You Claim Social Security Before You Retire? Here's What to Know.
Key Points
You may still be working when you become eligible for Social Security.
Claiming benefits while working is possible, but there can be conquences.
Consider your need for money and the upside of waiting.
- The $23,760 Social Security bonus most retirees completely overlook ›
One big misconception about Social Security is that you need to be retired to collect benefits. Once you turn 62, you're eligible to file for Social Security, whether you're working full-time, part-time, or not at all.
It's not a given that claiming Social Security before you retire is a bad idea. But it's important to understand the implications of doing so and what your options look like.
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The earnings test could reduce your benefits
Social Security's full retirement age is 67 for anyone born in 1960 or later. Once you reach full retirement age, you're not subject to an earnings test. Prior to full retirement age, you are.
The earnings test dictates how much income you can earn from a job before having some (or all) of your Social Security benefits withheld.
If you earn above $24,480 this year, for example, the Social Security Administration (SSA) will withhold $1 in benefits for every $2 over that limit. If you'll be reaching full retirement age this year, you'll have $1 in Social Security withheld per $3 over $65,160 in earnings.
Withheld benefits for exceeding the earnings-test limit are not forfeited for life. Once you reach full retirement age, the SSA recalculates your benefit payments and returns that money to you over time.
However, claiming Social Security before full retirement age reduces your monthly payments before accounting for the earnings test. If you're not yet retired, you may not want to lock in permanently reduced Social Security checks if you're still colleting a steady paycheck.
Filing at or after full retirement age is a different story
It's one thing to claim Social Security early if you're not yet retired. But if you've reached full retirement age, the situation is a bit different.
Not only is there no earnings test to worry about, but you're also not looking at a reduced monthly benefit. You may decide that filing at full retirement age makes sense because it gives you access to extra money you can use to enhance your life.
You should also know that you get credits for delaying Social Security past full retirement age. For each year you wait, until age 70, your benefits get an 8% boost.
But once you turn 70, those benefits can't continue growing. So if you're still working at 70, it pays to sign up for Social Security -- even if you intend to stay at your job for another five years or longer. There's nothing to gain by delaying Social Security past the age of 70.
All told, claiming Social Security before you actually retire may or may not be a wise decision. You'll need to think about the specifics of your situation to come to a smart choice.
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