Retire Well

The consequences of claiming Social Security too early

Claiming Social Security at this age can cost you

After the stock market's recent volatility, many investors may be worried that a 10 percent "correction" or decline in their retirement portfolio will make it difficult — or impossible — for them to retire when they'd planned. But how many pre-retirees have considered the impact of having their guaranteed income stream in retirement potentially cut by as much as three times that amount? That's what could happen if you claim your Social Security benefits too early.

A decline in the stock market may reduce the balance in your retirement portfolio for a while, but you may have a chance to make up all or part of those losses over time as stock prices rise. However, if you take your Social Security benefits before your full retirement age that could reduce your monthly payment by as much as 30 percent for your entire life.

"The challenge is, every case is different, every individual has individual circumstances, but overall claiming Social Security too early at the age of 62 has compounding effects in the future," said Financial Planning Association President Edward Gjertsen.

So while it may be tempting to get your monthly Social Security payment as soon as possible, it's important to calculate how much you'd get, and what you'd give up, by claiming benefits early versus waiting a few more years.

A new survey shows 39 percent of consumers in their mid-40s, 50s and 60s expect Social Security benefits will make up at least half of their retirement income, according to the AARP and the Financial Planning Association.

If your monthly benefit is $1,000 and you start collecting Social Security at age 62 — the earliest age that you can claim it — it could increase by 20 to 35 percent if you wait to until your full retirement — age 66 or 67 — to collect benefits.

What happens if you wait to claim the benefits even later?

"If they could wait until they're 70, they can increase their Social Security benefits by 8 percent per year; it's a big number," said AARP President Jeannine English.

That's why financial planners suggest you consider several factors to maximize your benefits.

When you should file for Social Security benefits

First, tally up your other sources of retirement income, including 401(k)s and workplace retirement plans, IRAs and pensions.

Your employment status is critical, too. If you enjoy working and can work longer, waiting until your full retirement age or age 70 may significantly increase your earning, savings and Social Security benefits. But if you are unable to continue working, it may make sense to claim benefits before your full retirement age.

Consider your current health status as well as life expectancy. Again, if you are unable to work, due to health concerns, financial planners may suggest claiming benefits earlier. While it can be difficult to predict how long your Social Security benefits will need to last, you can gauge your potential life expectancy by using the calculator at

Financial advisors also pay close attention to your marital status in making recommendations about when to claim Social Security. Spousal benefits provide an additional layer of financial security — as much as $100,000 or more in lifetime Social Security benefits depending on your situation, according to Financial Engines, which estimates married couples can have as many as 8,000 different strategies to choose from when it comes to when and how to collect their benefits. Benefits available to divorced or widowed spouses are also important factors to consider.

Financial planners often advise their clients not to worry so much about market fluctuations, but focus on these objective factors to ensure they are able to maximize their Social Security benefits, an important piece of their overall retirement income.