Choosing when to start collecting Social Security ranks among the most consequential financial decisions of a person’s life. You can sign up for benefits at any time after you turn 62, but claiming before your full retirement age (FRA) carries real costs. For anyone born in 1960 or later, FRA is 67, and filing even a few years early locks in a permanently reduced monthly check.
A 64-year-old reader recently sent in a question that captures the tension many pre-retirees face. They want to claim benefits now, while still working, so they can put that extra money toward paying off their mortgage. The idea is that arriving at retirement debt-free will make day-to-day expenses more manageable. It is a reasonable instinct, but the math deserves a hard look before they sign anything.
Collecting Social Security while continuing to work can sharply reduce those monthly payments, sometimes to a fraction of what the worker expected.
The problem with claiming Social Security early and working
Once you reach FRA, you can earn any amount from a job without the Social Security Administration withholding a single dollar from your monthly checks. Claim before FRA, though, and you become subject to an earnings-test limit that adjusts each year. Exceed that limit and the SSA starts trimming your benefits.
In 2026, the earnings-test limit for workers who are under FRA all year is $24,480. For every $2 earned above that threshold, $1 in Social Security benefits is withheld. Workers who will reach FRA during 2026 face a much more generous limit of $65,160, with only $1 withheld per $3 earned above it. Because our reader is 64 and will not hit FRA until age 67, they fall under the stricter $24,480 ceiling.
Depending on what the reader currently earns, this could be a significant problem. A salary that comfortably clears $24,480 could see Social Security payments reduced to nearly zero. The SSA does not treat that withheld money as gone forever. Once you reach FRA, the agency recalculates your benefit upward to credit you for the months it held back payments, so you do eventually recover those funds through larger checks. Still, leaning on that future credit as a reason to file early misses a critical point: the reader was hoping to use the Social Security income now, to pay off debt before retirement. If the earnings test swallows most of those payments, the mortgage-payoff strategy falls apart.
Setting the earnings test aside for a moment, there is also the matter of the mortgage itself. Carrying a moderate mortgage balance into retirement is not necessarily a crisis. If the interest rate is low, continuing to make regular payments while keeping cash available elsewhere can actually be the more flexible approach. And for those who still itemize deductions, the mortgage interest deduction may provide some offset.
The deeper issue is the permanent reduction that comes with early filing. A person whose FRA is 67 who claims at 64 locks in a benefit cut of roughly 20% for life. That smaller base compounds over decades of retirement and can create a real income shortfall in later years, when expenses related to healthcare or assisted living tend to rise. Accepting both an early-filing reduction and an earnings-test reduction at the same time means collecting a check that is a fraction of what the worker earned.
Be careful with claiming Social Security early
This reader is clearly thinking ahead and trying to set themselves up for a more affordable retirement. The goal of eliminating a mortgage payment before leaving work is sensible. But the path chosen to get there could produce the opposite result: a permanently shrunken Social Security benefit that leaves less income available precisely when it is needed most.
There is also the tax dimension to consider. The reader is accustomed to seeing withholding come out of each paycheck automatically. Social Security income works differently. If combined income (adjusted gross income, plus tax-exempt interest, plus half of Social Security benefits) exceeds $25,000 for a single filer or $32,000 for a married couple filing jointly, up to 50% of benefits can become federally taxable. Above $34,000 for singles or $44,000 for joint filers, up to 85% of benefits may be taxed at ordinary income rates. For someone still working, the wages alone will likely push combined income past those thresholds. The tax bite on top of the earnings-test reduction and the early-filing reduction could leave the reader with far less spendable income than they anticipated.
One recent development worth noting: the One Big Beautiful Bill Act, signed in July 2025, created a temporary $6,000 additional federal deduction for taxpayers aged 65 and older (both spouses can claim it if both are 65 or older), effective for tax years 2025 through 2028. That deduction phases out for higher incomes. At 64, the reader does not yet qualify, but it is worth keeping in mind for the years just ahead.
Given all of this, the stronger move is to hold off on filing, or at least to sit down with a financial advisor and model the scenarios carefully. Paying off a mortgage three years early is a worthy goal. But doing so by permanently reducing a lifetime income stream, and then paying taxes on whatever benefits survive the earnings test, is unlikely to come out ahead.
Editor’s note: This article has been updated to reflect 2026 Social Security earnings-test limits ($24,480 for workers under FRA all year, up from $23,400 in 2025; $65,160 for workers reaching FRA in 2026, up from $62,160), and to add context about the new temporary $6,000 senior federal deduction created by the One Big Beautiful Bill Act for taxpayers aged 65 and older for tax years 2025 through 2028.
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