The timing of your Social Security benefits claim matters more than you might think. It can change both monthly and lifetime benefits in substantial ways that affect your finances for your entire retirement.
Unfortunately, if you make a timing mistake, it can be difficult to undo.
Here’s one example of a timing mistake many people end up regretting but have few options to correct.
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Will you make this Social Security timing mistake?
For many people, claiming Social Security benefits early (ahead of their full retirement age or even before age 70) ends up being a mistake and a decision they regret.
That’s because waiting until 70 is necessary to maximize your monthly income, and often your lifetime income as well.
Delaying Social Security until 70 can increase your benefit substantially, as you avoid early filing penalties that would reduce your check before full retirement age, and you earn delayed retirement credits that increase payments after FRA.
The effect of waiting is bigger than you might think. If you would be on track for a standard $2,000 benefit, a claim at 62 leads to a 30% benefit reduction. It locks you into a $1,400 monthly benefit instead. A claim at 70, on the other hand, results in a 24% benefits bump. That brings your payment up to $2,480.
Passing up an extra $1,080 per month could be a major source of regret. That’s not even considering the fact that you’ll potentially reduce survivor benefits. The NBER report shows that over 90% of current workers will get more lifetime Social Security income if they claim at 70 versus at an earlier age.
Why an early claim is so hard to undo
Unfortunately, an early Social Security claim can be difficult to undo. Once you file for benefits, there are few opportunities to go back on your decision.
You can rescind your claim if it’s been less than a year, but this would mean paying back any benefits you collected, as well as any spousal or disability benefits your family members collected on your work history.
If you’ve reached your full retirement age, you could also suspend your benefits, ideally until 70. However, there’s also a catch to this. Others claiming on your work history would see their benefits paused as well.
Finally, if you can find work and earn a big paycheck, you may be able to get your income above the threshold where your benefits are paused due to earning too much. This would mean your checks stop temporarily because of the earnings test and can be recalculated at FRA to account for the benefits you didn’t collect.
This is an option only if you haven’t yet reached FRA, though. Once you’ve reached full retirement age, you can work as much as you want without losing benefits.
Since there aren’t a lot of good ways to undo an early claim if you realize later that it was a timing mistake, you should carefully consider your Social Security claiming strategy in your retirement planning process. This can help you avoid being left with retirement regrets.
