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Should I take Social Security benefits early?

Should I take Social Security benefits early?

July 11, 2019

Yes, you can elect to receive retirement benefits early

As you approach retirement, you must decide when to start receiving your Social Security retirement benefits. You may elect to start receiving Social Security retirement benefits at age 62 rather than waiting until normal (full) retirement age.

Your retirement benefit will be permanently reduced

If you start receiving retirement benefits early, you will get less per month than if you start receiving them at normal retirement age. This benefit reduction will be permanent.

If your benefit will be based on your own earnings record, it will be reduced by 5/9th of 1 percent for each month of early retirement up to 36 months, and by 5/12th of 1 percent thereafter. If your benefit is based on your living spouse's record, it will be reduced by 25/36th of 1 percent for each month of early retirement. If your benefit is based on your deceased spouse's record, it will be reduced by 19/40th of 1 percent for each month of early retirement.

If your normal retirement age is 67, your benefit will be reduced by 30 percent if you choose to retire at age 62.

Am I qualified to elect for early benefits?

You must be eligible to receive early retirement benefits. In general, you must be:

  • At least age 62 and
  • Fully insured by age 62 for retirement benefits (in most cases, you must have earned 40 Social Security credits.
  • Receiving benefits at age 62 is not automatic. The Social Security Administration suggests that you apply three months before the date you want your benefits to start.

Benefits (Pros)

You will receive more monthly benefit checks if you retire early

If you elect for early benefits, you will receive more checks than if you elected at normal retirement age. For instance, if your normal retirement age is 66 and you retire at age 62, you will receive 48 more benefit checks than you will if you wait until normal retirement age to retire. Even though your benefit at age 62 will be 25 percent less than it will be at age 66, those four years of extra benefit checks add up to a lot of money. Generally, it will take approximately 12 years for the overall value of your retirement benefits taken at normal retirement age to begin to outweigh the value of reduced benefits taken at age 62.

You can invest your Social Security retirement benefit

Investing your Social Security retirement benefit is an option if you don't need to use all of it for living expenses. If you are able to invest all or part of your Social Security benefit, receiving early retirement benefits might be advantageous. Not only would you receive more benefit payments, but also you would earn money on those payments when you invest them. The rate of return you would receive would depend upon your investment.

Of course, your rate of return (or inflation-adjusted yield) also depends on how inflation affects your investment. In addition to inflation, you also have to consider how taxes may reduce your yield. As the real rate of return increases, the advantage of taking early retirement benefits increases.

Trade-offs (Cons)

Your retirement benefit is permanently reduced

You will receive less per month if you retire early rather than at normal retirement age. This gives you less money to meet your expenses each month, even though your total lifetime benefit may be more than if you waited until normal retirement age to retire. Since some people underestimate how much income they will need when they retire, the reduced benefit may cause them financial hardship.

You will have less chance to increase your average indexed monthly earnings (AIME)

In general, if you were born after 1928, your benefit is calculated by averaging your 35 highest years of indexed earnings to determine your AIME, then applying a formula to that amount. If you made little or nothing in one or more of those 35 years, waiting to retire until normal retirement age might increase your benefit because each year you wait to retire gives you a chance to earn enough to replace a lower year of earnings in the calculation.

You may live longer than you expect

When you're planning your retirement, consider your life expectancy. Although you can't know for sure how long you might live, you can make an educated guess based on your current health, your family's history of longevity, and the average life expectancy for someone your age.

Your surviving spouse's benefits may be reduced

If you die after beginning retirement benefits at normal retirement age, your surviving spouse's benefit at normal retirement age will be 100 percent of your primary insurance amount (PIA). However, if you elect early retirement benefits, then die, the highest benefit your spouse can receive based on your earnings will equal the reduced benefit you were receiving (but not less than 82.5 percent of your PIA). This tradeoff is mitigated somewhat for a working surviving spouse, because at normal retirement age he or she can choose to receive benefits based on his or her own earnings record if that benefit would be greater.

An earned income limit applies to earnings before normal retirement age

If you retire early (prior to normal retirement age), money you earn after you retire may reduce your Social Security benefit. However, if you wait to retire until your normal retirement age, you can earn as much as you like without reducing your Social Security benefit. This means that if you plan on earning a lot of money after you retire, it might be advantageous for you to retire at normal retirement age rather than earlier.

Tax considerations

If you elect for early social security, will your benefits be taxed differently?

Social Security retirement benefits received at any age are not taxed if your total income (modified adjusted gross income) plus one half of your Social Security is $32,000 or less if you file a joint tax return or $25,000 or less if you file a single tax return. If your total income plus one half of your Social Security exceeds this amount, then up to 85 percent of your Social Security benefit may be taxed, depending on the circumstances. If you think that your earnings prior to normal retirement age will make your Social Security benefits taxable, you can either try to reduce your earned income or consider retiring later (if doing so would lessen your tax liability).

What should I do?

Decide whether you want to elect early by weighing all of your options

Although for some people, the financial advantage of electing early will outweigh other concerns, you should carefully consider all aspects of this important decision. Consider the following questions:

  • Will your lifetime benefit be higher if you were to elect early vs the normal retirement age?
  • Can you wait to receive benefits, or will you need the retirement income as soon as possible?
  • Are you emotionally ready to retire?
  • Do you anticipate going back to work after you make this selection?
  • How will your early social security election affect your family? Will their Social Security benefits be affected? Will your benefits be subject to the family maximum?
  • How will you pay for medical insurance coverage until age 65 (when you become eligible for Medicare?

You can estimate your retirement benefit online using the Retirement Estimator calculator on the Social Security website ( You can create different scenarios based on current law that will illustrate how different earnings amounts and retirement ages will affect the benefit you receive.

If you are still undecided, take a minute to contact us directly.  We can assist in guiding you to create an action plan based on your needs and wishes!


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***The information in this blog post is intended to be informational.  It is NOT intended as tax or legal advice.  It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.