29% of Social Security Recipients May Be Making a Huge Mistake

Social Security serves as an important source of income for millions of retirees today. And without those benefits, a good number of older Americans would have a difficult time paying their bills.

That's why it's important to claim Social Security at the right time. And data shows that almost one-third of Americans may be making a big mistake in the course of signing up.

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Can you afford a major hit to your monthly benefits?

In a recent Transamerica survey, 29% of respondents said they started getting Social Security at 62. That's not surprising, given that it's the earliest age to begin collecting benefits. But it's not necessarily such a comforting statistic.

Claiming Social Security at 62 means locking in the smallest possible monthly benefit you might get. By contrast, waiting until full retirement age means getting your complete monthly Social Security paycheck without a reduction. Full retirement age is 67 for anyone born in 1960 or later.

If you're in that boat and claim Social Security at 62, you'll be looking at a 30% reduction in your monthly checks -- for life. And that could prove problematic for a few reasons.

First, on a basic level, you're getting less money. But also, if you end up living longer than expected, it could mean missing out on a lot of lifetime Social Security income.

Plus, the longer you live, the more of your savings you might drain. If you don't have a larger Social Security benefit to fall back on as that happens, you could end up at risk of running into major financial issues very late in life, when going back to work to generate income really isn't an option.

You may have options if you've filed early already

To be clear, claiming Social Security at age 62 is not automatically a mistake. For some people, it's a move that makes sense. But if you've claimed benefits at 62 already and now regret your decision, you should know that it may not have to be set in stone.

If you're still within a year of your filing date, you could do the following:

• Withdraw your application for benefits.
• Repay the Social Security Administration every dollar in benefits it paid you.

From there, you'll get the option to sign up for Social Security again at a later age, thereby locking in a more generous monthly benefit for life.

However, you should know that Social Security recipients only get one do-over per person. So if you exercise that option now, you won't be able to do it again. But it's worth considering that do-over if you're feeling iffy about your decision to claim benefits at 62 and lock in a major reduction.

As it is, there's the possibility that Social Security might have to cut benefits to address a funding shortfall. You don't want to pile onto that mess by reducing your personal monthly benefit -- especially if you have reason to believe you'll be pretty dependent on Social Security in retirement.

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