When planning your retirement, the number of things that need to be considered can become overwhelming, and sometimes even one oversight could cost you a bit of additional financial security. Yes, Social Security will be there as a source of financial support, however, doing your due diligence when you begin claiming is also very important as it could make the difference between you receiving the full benefits you are entitled to or facing a reduction.
The amount that will be paid to you by the Social Security Administration (SSA) is primarily determined in relation to your contributions into the Social Security payroll tax during your working career. However, it is not as simple as that, and the age at which you claim, can greatly affect the amount you receive in benefits each month. As such, here are some points worth taking note of when planning your retirement.
Social Security do-over
If you have paid into the dedicated Social Security payroll tax throughout your working career and as a result, earned a sufficient number of work credits, you will be able to claim benefits from the Social Security Administration (SSA) from age 62. Claiming at age 62 is, however, considered as claiming early, which will result in a benefit deduction of up to 30%. This is because of the policy of a Full Retirement Age.
When the Social Security program was first introduced, the Full Retirement Age (FRA) was 65, however, due to the financial health of the program worsening and life expectancy increasing, the 1983 Amendments stipulated that the FRA be gradually increased to 67 in two month increments annually. In 2025, the FRA increased to 66 years and 10 months for those born in 1959, and in 2026 it will increase one final time to 67 years for those born in 1960 and later.
As such, claiming before reaching your FRA will result in a deduction to your benefits of up to 30%, depending on how many months remain between the age at which you claim and your FRA. If you claim early, your reduced benefit will typically be locked in, however, each retiree will have one “do-over” available to them.
If a retiree claimed benefits early, they can withdraw their application within the first twelve months. They will, however, have to repay all of the benefits they had received up to that point. This will allow them to resubmit their application at a later stage, allowing for a bigger check. This “do-over” can only be used once, and it has to be within the first year of filing.
Delaying claiming and coordinating with your spouse
Whilst claiming early reduces your benefits, delaying your retirement will earn you higher benefit than you would have been entitled to at FRA. If instead of claiming at your FRA, you wait until age 70, you will receive up to 124% of your benefit. For each year that you delay your claim beyond your FRA, you will receive an 8% bump to your benefits. This would be the ideal situation for most, but only in theory, and as such, would depend strongly on your projected life expectancy. If you health is not in a good condition, for instance, delaying your claim may not be as worthwhile since you will only be receiving benefits for a limited number of years.
If you are married and your spouse also qualifies for Social Security, coordinating your claims may also prove to be fruitful. For instance, one spouse could claim at FRA whilst the other delays their claim so as to earn the boosted benefit with delayed retirement credits. At the end of the day, no two households will have the same situation and as such, it is not possible to have one strict formula of success when filing for benefits. For this reason, it is important to know exactly how the program works, with regards to all of its rules and quirks.