Here's How Much Social Security You'll Lose by Claiming 5 Years Early
Key Points
Eligible taxpayers can claim Social Security retirement benefits as early as age 62.
Most people's intended and expected age for filing, however, is well after that point.
While the payment reduction isn't insignificant, in some cases it may be worth it.
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Most people understand that claiming Social Security benefits before reaching your full retirement age (or FRA) results in smaller payments. But how much smaller?
It depends on how much earlier you initiate these benefits. If you file at the earliest possible age of 62 rather than this year's FRA of 67, it will reduce the amount of your payments by 30%. In more tangible, relatable terms, claiming five years earlier than your intended age will dial back the typical monthly payment of $2,071 to about $1,450. For most people, that's a difference not to take lightly.
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In this vein, understand that you can also claim at any point in between those two points in time, with a reduced degree of penalty. Filing when you turn 64, for instance, only reduces your intended benefits payment by 20%. Claiming just two years before you reach your FRA only lowers your monthly benefit by about 14%.
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Plenty of people are indeed claiming early, by the way, and simply dealing with the impact of their decision. The Social Security Administration reports while this year's average monthly benefits payment for 67-year-old retirees is just over $2,016, the 606,000 62-year-olds who are already receiving benefits are collecting measurably smaller average payments of $1,424.
It also works the opposite way. That is to say, waiting until after reaching your full retirement age to file for Social Security benefits adds to them. Although there's no additional upside to waiting beyond the age of 70 to claim, filing for benefits at the age of 70 will add another 24% to the monthly amount that future retirees will be collecting.
Just bear in mind that the earlier you claim, the longer you'll be receiving benefits. The later you claim, the less time you'll be getting these payments. Claiming sooner rather than later may still be the right choice for you.
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