More Retirees Are Taking Social Security Early – But Is It the Right Move?
WASHINGTON – A growing number of Americans are opting to claim Social Security benefits as soon as they become eligible, despite possibly leaving money on the table. While claiming early can provide a crucial financial lifeline, experts caution that it’s a decision with long-term implications that requires careful consideration.
The trend comes as many face financial pressures in retirement, including debt, unexpected expenses, and concerns about the future solvency of the program. Understanding the pros and cons of claiming early versus delaying benefits is critical for maximizing lifetime income.
In 2023, the most popular age to begin receiving Social Security was 66, chosen by 34.1% of new claimants, according to data from the Social Security Administration. However, age 62 – the earliest eligibility age – was a close second, with 23.2% of new beneficiaries starting their benefits than. Age 65 rounded out the top three at 11.3%, with all other ages accounting for single-digit percentages of claims.
Several factors are driving the trend toward earlier claiming. Immediate income needs, particularly for debt repayment or financial emergencies, are a primary motivator. Health issues and a desire to stop working also play significant roles. Some retirees claim early to maximize household benefits if one spouse needs to retire.
A persistent, though often unfounded, fear that the Social Security program will run out of money also contributes to the decision. “There are always people working and paying into the system,” says financial planner Kimberly Eckels. “There are a lot of things that could be done to fix the system.”
Claiming benefits before your full retirement age results in a permanent reduction in your monthly payment. The reduction varies depending on how many months before full retirement age you claim, but can be as much as 30% for those claiming at 62. Conversely, delaying benefits past your full retirement age results in an increase in your monthly payment, up to 8% per year until age 70.
The government has options to address the long-term financial health of Social Security, including increasing the payroll tax that funds the program, raising the income threshold for continued tax payments, or increasing the full retirement age.
“Rash decisions because of fear lead to bad outcomes,” Eckels cautioned.
Retirees considering when to claim Social Security are encouraged to carefully evaluate their financial needs, health status, and life expectancy to make the most informed decision. Resources are available from the Social Security Administration (https://www.ssa.gov/) and financial advisors to help navigate this complex decision.