A Downside of Claiming Your Social Security Early
In the early stages of planning for retirement, most people recognize the value of waiting until their “full retirement age” to claim their Social Security benefits. This age, defined by Social Security, falls between age 65 and 67 (depending upon when you were born). Once you’ve reached your full retirement age, you can claim your full scheduled benefits.
On the other hand, you do have the opportunity to file for benefits as early as age 62. Your benefits will be permanently reduced by as much as 25 percent. But for some people, this becomes necessary despite their previous plans. Perhaps poor health forces an early retirement, or they need the additional income for some other reason.
Whatever the reason, you might consider making this move at some point. But before you do, there is something important you should know about claiming Social Security early. If you continue to earn income through work, part of your monthly checks could be withheld, essentially resulting in lower benefits than you had expected.
This withholding is subject to a certain limit, which can sometimes increase as the Social Security Administration adjusts it. Currently, one dollar of your benefits can be withheld for every two dollars that you earn over $16,920 annually. If you earn less than this limit, your benefits won’t be affected.
It’s important to remember that this withholding rule only applies to those who have filed for benefits earlier than their full retirement age. Once you reach full retirement age, your benefits won’t be withheld, no matter how much money you make. Social Security will also recalculate your benefits at this point, to credit you for amounts previously withheld. So, you aren’t losing the money forever, but it could be an unpleasant surprise for those who claim benefits while continuing to work.
We will continue to keep you informed of any issues that might impact your plans. Meanwhile, stay in touch with us so that we can help you tailor a plan to meet your individual needs for income in retirement.