3 Ways You Could Lose Social Security Benefits by Claiming Early

Claiming Social Security as soon as you turn 62 will net you the greatest number of checks over your lifetime. If you claim benefits for 20 years, that's 240 monthly payments, and some people get even more.

That said, there are some drawbacks to claiming benefits early that you'll want to be aware of before you make that call. Here are three to weigh before submitting your application.

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1. Early claiming benefit reduction

The most obvious drawback to claiming Social Security early is that you reduce the size of your checks. The Social Security Administration assigns everyone a full retirement age (FRA), which is 67 for most workers today. Every month you receive benefits before this age reduces your checks.

You lose 5/9 of 1% per month for up to 36 months of early claiming. Those who sign up more than three years early lose 5/12 of 1% per month. So if you sign up immediately at 62, you're actually shrinking your monthly checks by 30%, assuming you have a FRA of 67.

That doesn't mean it's always a bad choice, though. It could actually net you a larger lifetime benefit than delaying your application if you have a short life expectancy. It might also be the smart play if you're unable to cover your key living expenses without signing up for Social Security.

2. Reduced cost-of-living adjustments (COLAs) in dollar terms

The Social Security Administration increases benefits in most years to help counter some of the loss of buying power due to inflation. These annual cost-of-living adjustments (COLAs) are a percentage of your benefit. Because you get reduced monthly checks from claiming early, you also get smaller COLAs by dollar amount than you would have if you'd delayed Social Security until your FRA or waited until you qualify for your maximum benefit at 70.

Let's say you'd qualify for a $2,000 monthly benefit at your FRA of 67. Claiming at 62 drops this to $1,400 per month. If there's a 3% COLA, the $2,000 monthly benefit would increase to $2,060 -- a $60 boost. But the $1,400 benefit would only increase by $42 per month.

3. Withholding due to the earnings test

The Social Security earnings test could withhold money from your checks if you're claiming benefits before your FRA and earning income from a job at the same time. The size of the benefit reduction depends on your age and income.

In 2025, you lose $1 for every $2 you earn over $23,400 if you'll be under your FRA all year. If you'll reach your FRA this year, you only lose $1 for every $3 you earn over $62,160, assuming you earn this much before your birthday. It's possible that for some, the earnings test could effectively eliminate their monthly benefits, at least for a while.

Fortunately, there's an offsetting positive impact later. When you reach your FRA, the Social Security Administration increases your benefit to make up for what it withheld previously. If your checks were significantly reduced in years past, this adjustment could be pretty substantial.

If you're worried about losing money to the earnings test, consider delaying your Social Security application until you either retire or reach your FRA. After your FRA, the earnings test doesn't apply, no matter how much you make. Waiting to claim could also help you mitigate the two issues discussed above.

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