I Ran the Numbers: Here's What Claiming Social Security Early Could Cost You

Once you approach your 62nd birthday, you'll have a big financial decision to make -- claim Social Security right away, or hold off for the promise of larger monthly checks. And it isn't exactly an easy choice.

If you wait until full retirement age to file for Social Security, your monthly benefits won't be reduced. But for each month you file before that point, your benefits are whittled down slightly. And if you claim Social Security at 62 with a full retirement age of 67, you could be looking at significantly lower payments.

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Understanding the math on an early Social Security claim is crucial if it's something you're considering. Here's what you need to know.

Claiming Social Security early: The monthly hit

An early Social Security claim can mean lots of things. But since many retirees opt to take benefits as soon as they're eligible, let's assume you decide to file at 62. Let's also assume you'd normally get $2,000 a month at a full retirement age of 67.

If you sign up at 62, you'll be looking at a roughly 30% reduction in your Social Security checks, leaving you with $1,400 a month instead. So all told, your annual income will be $7,200 less than it could be if you were to sit tight until 67.

Claiming Social Security early: The lifetime hit

Filing for Social Security early won't automatically reduce your benefits on a lifetime basis. But it could end up doing that if you live past a certain point.

Here's an overview of how much less Social Security you might get in your lifetime if you were to file at 62, depending on how long you live:

Table and calculations by author.

As you can see, the longer you live, the more an early Social Security claim reduces your lifetime income.

Of course, the tricky thing is not knowing how long you'll live. And one thing you do need to realize is that if you end up living a shorter life, claiming Social Security early could put more money in your pocket over the course of your lifetime, despite reduced monthly checks.

That's why it's important to consider your health when deciding when to claim benefits, as well as your family history. If your parents lived into their 90s and your health is strong in your early 60s, it could pay to assume you'll have a similar longevity.

Claiming Social Security early: The survivor benefit hit

If you're married, an early Social Security claim won't just reduce your benefits. It could also lead to smaller survivor benefits.

If you're the higher earner in your household and you pass away before your spouse does, they'll generally be eligible for survivor benefits equal to what you got to collect. If you shrink those monthly checks with an early claim, it means your spouse could get a lot less money from Social Security after you pass.

Imagine you shrink your spouse's survivor benefits by $600 a month, and they outlive you by 15 years. That means they're getting $7,200 less per year, or $108,000 less in their lifetime. Those smaller checks could also be a big problem if your spouse ends up needing to pay for long-term care or you don't have a lot of money in retirement savings to leave them with.

Do the math before making your decision

There's a lot riding on your Social Security filing age. Before taking benefits, make sure you understand the true math behind an early claim.

The numbers above are just a single example. And the exact hit your monthly, lifetime, and survivor benefits might take will hinge on the amount of Social Security you're eligible for based on your personal wage history.

You can find out that number by creating an account on SSA.gov, checking your earnings statements, and doing your own math. But it's an important exercise to run through before finalizing your claim.

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