3 Signs You're Claiming Social Security Too Soon

When it comes to Social Security, the timing of your claim matters. Even though your benefits are calculated based on your personal wage history, you only get them without a reduction if you wait until full retirement age to sign up. That age is 67 if you were born in 1960 or later.

But you’re allowed to claim Social Security as early as age 62. For many people, filing ahead of full retirement age is an appealing choice. If you’re thinking of doing the same, here are a few signs that you may be jumping to file for benefits too soon.

1. You’re still earning a good paycheck

Claiming Social Security early reduces your benefits for life. It’s one thing to file early if you’re out of work and need money. It’s another thing to voluntarily shrink your benefits when you have a decent paycheck coming your way.

There’s another issue with claiming Social Security early when you’re working. If you haven’t reached full retirement age, you’ll be subject to an earnings test.

Exceeding its limit could result in having some or all of your Social Security check withheld. So if you’re working full-time, or even part-time, and your wages can cover most or all of your bills, you may want to wait on filing.

2. Longevity runs in your family and your health is great

If there’s a good chance you’ll live a long life (say, well into your 80s or beyond), claiming Social Security on the early side could result in less lifetime income for you. In a situation like that, from a pure math perspective, you’re generally better off filing for Social Security after full retirement age. Each year you wait (until you turn 70) boosts your benefits by 8%.

Of course, the challenge is that you don’t know how long you’ll live. But if longevity runs in your family and you’re in great health in your early 60s, there’s a reasonable chance you’ll enjoy a longer lifespan, too. Waiting on Social Security could boost your lifetime payout, making waiting worth your while.

3. You don’t have much money saved for retirement

Ideally, Social Security will be just one income stream for you in retirement. You should also aim to have a decent chunk of savings to supplement those benefits.

If that’s not the case, and you have very little money saved for retirement, you may want to hold off on taking benefits. If your nest egg is unlikely to last for many years, or if it only allows for minimal withdrawals, you may need larger Social Security checks to cover your costs.

It can be tempting to file for Social Security on the earlier side. But if any of these signs apply to you, you may be making plans to claim benefits too soon. Waiting could be a smarter choice that ultimately improves your financial picture.