3 Social Security pitfalls that can shrink your benefits

Most workers today have a full retirement age of 67. That is the point at which you can claim the complete benefit you earned through your work record. Filing early can trigger reductions that cut your monthly checks by as much as 30% if you start as soon as you become eligible at 62.

This does not automatically make early filing a bad decision. It may be reasonable if you need the income to cover basic expenses, and in some cases it can even maximize your lifetime benefits if you do not expect to live very long. But for many people, starting at 62 can lead to significantly less Social Security income over time.

2. The earnings test can affect your checks

If you claim Social Security before reaching full retirement age and continue working, the earnings test can temporarily withhold part of your benefits once your wages pass a certain threshold. For those under full retirement age for the entire year, the reduction is $1 for every $2 earned above $24,480. If you reach full retirement age during the year, the limit is $65,160, and the reduction is $1 for every $3 earned above that amount, but only on income earned before your birth month. Those thresholds are scheduled to increase to $25,560 and $67,920, respectively, in 2027.

The withheld money is not gone permanently. Once you reach full retirement age, your benefit is adjusted upward to account for what was held back. Even so, the earnings test can create short-term budgeting problems, so it is important to keep it in mind if you plan to claim at 62 while still working.

3. You still have some flexibility

The Social Security Administration allows you to withdraw your application within 12 months of filing if you decide you want to change your start date. But this option is available only once, and you must repay every benefit received so far by you and anyone else who has been paid on your earnings record.

Because that repayment can be difficult, it is usually wiser to think carefully about your claiming age from the start rather than depending on a withdrawal later. Before filing at 62, make sure you are comfortable with the trade-offs.