Worried About Social Security Reductions? This Choice Could Hurt You Even More

Key Points

• Social Security could face substantial benefit reductions by 2032.

• If that concerns you, avoid filing for benefits too early.

Anyone following recent coverage of Social Security is likely aware that the program may be headed toward major benefit cuts.

Trustees project that the Old-Age and Survivors Insurance Trust Fund could be depleted by the fourth quarter of 2032. After that point, available income may cover only 78% of scheduled benefits.

A 22% reduction would be severe for many of today’s beneficiaries. But if that possibility worries you, your filing decision matters just as much.

Claiming too early can reduce your retirement income

Your retirement benefit is based on your 35 highest-earning years, adjusted for inflation. The age you file also affects the monthly amount you receive.

If you wait until full retirement age, which is 67 for people born in 1960 or later, you receive your full monthly benefit without an early-claiming penalty. Filing before that age lowers your payments month by month.

The earliest age to claim Social Security is 62. Filing then can leave you with a benefit that is about 30% smaller than what you would receive by waiting until 67. That is even steeper than the potential 22% reduction Trustees have warned about.

Think carefully before choosing when to file

Of course, broad Social Security cuts are not guaranteed. Lawmakers could still take steps to avoid an across-the-board reduction, including tax changes or raising full retirement age by a few years to keep workers in the labor force longer.

Still, if you claim benefits before full retirement age, your monthly checks will be reduced. There is no way around that. Filing at the earliest possible age could result in substantially smaller payments.

That is why it is so important to think carefully about when to claim. Your retirement income needs, savings, and health can all help determine the best filing age for your situation.

Also keep in mind that your options do not end at full retirement age. For each year you delay past that point, your benefit rises by 8% annually until age 70. If your aim is to maximize Social Security income, full retirement age is not necessarily the best stopping point.