What to Know About Claiming Social Security Early or Delaying Social Security
Social Security retirement benefits are designed to provide a steady income stream in retirement, but the amount you receive depends on when you claim. The decision to claim benefits early, at full retirement age (FRA), or delay past FRA significantly impacts the monthly payments you will receive for the rest of your life. Understanding how early claiming reduces benefits and how delayed claiming increases them is critical for optimizing Social Security as part of a broader retirement strategy.
What It Means to Claim Early or Delay Social Security?
Claiming early or delaying social security is simply the decision of when to collect benefits in relation to your full retirement age (FRA). Your FRA is assigned based on your year of birth as show below:
| Year of Birth | FRA |
| 1943-1954 | 66 |
| 1955 | 66 & 2 mo |
| 1956 | 66 & 4 mo |
| 1957 | 66 & 6 mo |
| 1958 | 66 & 8 mo |
| 1959 | 66 & 10 mo |
| 1960 & Later | 67 |
Fun Fact: If your birthday falls on the 1st of the month, Social Security assumes you were born in the previous month which may affect your numbers!
What Happens If You Claim Social Security Earlier Than Your FRA?
If you claim your benefit before your FRA, your benefit will be reduced by the formula but the number of months you claim early. The reduction that applies first is “5/9 of 1%” for each month you claim early up to 36 months. What this means, is that for each month you claim early, your benefit is reduced by .00555555%! Odd, I know.
Here is an example assuming your PIA is $1,000.
If you claimed 1 month early, your benefit would be reduced by “5/9 of 1%” times 1 month times your PIA ($1,000) which equals $5.55 resulting in an actual benefit of $994.45. If you claimed 20 months early, your benefit would be reduced by “5/9 of 1%” times 20 months times your PIA which equals $111.11 so your benefit would be $888.89. You continue this up to 36 months were the maximum reduction 20%.
Then you proceed to the next reduction formula which is “5/12 of 1%” for up to 60 months! This basically takes you all the way up to the earliest claiming date of Age 62. For example, if you claimed at age 62 or 60 months early, you would multiply “5/9 of 1%” by 36 months to get $200 and then multiply “5/12% of 1%” by 24 months to get $100. Add the two reductions together to get $300 as the maximum reduction to your PIA which results in a benefit of $700 per month.
What Happens If You Claim Social Security Later Than Your FRA?
If you delay your benefit after your FRA, you receive a delayed retirement credit up to a maximum age of 70. The delayed retirement credit is expressed in the same way as the reduction formula. For every month you delay past your FRA, your benefit is increased “2/3 of 1%”. For example, if you waited 12 months after your FRA, your benefit would be increased by “2/3 of 1%” times 12 months times your PIA which equals $80 so your new benefit would be $1,080 per month. If you delayed to the maximum of age 70, your benefit would be increased by “2/3 of 1%” times 36 months times your PIA which equals $240. In this case, your maximum benefit would be $1,240 per month.
Additional Considerations
Spousal Considerations
When you claim your Social Security benefit has two impacts on your spouse.
- Spousal Step Up: Assuming they claim their own benefit, they will now be eligible to receive a spousal step up. The longer you delay, the less time the spouse receives that spousal benefit.
- Survivor Benefits: At death, a spouse is eligible for the higher of their benefit or their spouses full benefit. When you claim, you lock in your spousal survivor benefit. If you claim early, that survivor benefit is lower for life. If you claim later, that benefit is higher for life.
Working While Claiming
If you work and earn an income while claiming, your benefits can be reduced. While these are not fully lost in the long run, it is a consideration.
Summary
Claiming Social Security early results in permanently reduced benefits, while delaying beyond FRA increases them significantly. The optimal claiming strategy should be aligned with an individual’s overall retirement income plan, longevity expectations, and financial needs. Consulting with a financial planner can help determine the best strategy for maximizing Social Security benefits as part of a broader retirement plan.