Retirees Could Lose Thousands With This Common Social Security Mistake

For millions of Americans, deciding when to claim Social Security is one of the biggest financial choices they’ll make in their lifetime. That’s because the timing of those claims impacts monthly benefit payments.

You’re allowed to claim Social Security at any point once you turn 62. But if you don’t wait to file until full retirement age (FRA), which is 67 for anyone born in 1960 or later, your monthly benefits will be reduced.

At first glance, filing for Social Security at age 62 can seem like an easy decision. After all, you’ll get your money sooner.

Many people worry that Social Security could face future cuts or program changes. By getting your money as soon as possible, you can at least start improving your cash flow before negative news comes down the pike.

But while claiming Social Security early might seem like a smart choice, it could sorely backfire in a serious way.

Filing early comes at a big cost

It’s easy to see why you may be tempted to claim Social Security ahead of FRA. But you may regret that decision once you see how much money you could lose not only per month, but in your lifetime.

Let’s say you’re eligible for $2,000 a month in Social Security at 67, but you file at 62 instead. That means you’re looking at a 30% reduction, or $600 less per month and $7,200 less per year.

You might think it’s worth giving up $7,200 to get your money sooner. But if you end up living a long life, you could end up losing many thousands of dollars due your early filing decision.

Let’s say you live until age 85. At that point, you’re looking at giving up about $45,600 in lifetime Social Security by claiming benefits at age 62 instead of waiting until 67.

And the numbers get worse the older you get. If you end up living until 90, claiming Social Security at 62 versus 67 means losing out on $81,600.

That’s a lot of money to give up, especially since the way to earn Social Security is to pay into the program every time you earn a paycheck. After years of seeing less net pay, why would you want to give up more retirement income?

Don’t let fear and confusion guide your decision

You may be inclined to claim Social Security as early as possible because you’re concerned that the program is running out of money. But you should know that even if Social Security undergoes changes, there should still be benefits to pay.

Those benefits may be smaller. But Social Security isn’t at risk of going away completely, which means an earlier claim still leaves you with less money each month.

You might also claim Social Security early because you don’t realize that the reduction you face for doing so is permanent. So here’s your heads up on that, too.

A costly decision that could impact the rest of your retirement

Claiming Social Security early could have a major impact on your senior years. It could leave you with smaller monthly checks and a smaller lifetime total in Social Security.

Plus, don’t forget that one of retirees’ biggest enemies is inflation. If you claim Social Security early and shrink your benefits, you may have even more difficulty covering your bills as expenses rise, especially since Social Security has built-in inflation protection with its annual cost-of-living adjustments.

Before you claim Social Security early, make sure you understand the consequences. Waiting a few more years to take benefits could mean setting yourself up for a much easier time financially throughout retirement.