Claiming early Social Security: What you need to know

You've worked hard for decades, and retirement's nearly on the horizon. If you're contemplating retiring sooner rather than later, you may wonder if you can cash out your Social Security benefits early.

You can claim the benefit at 62, but the longer you wait, the larger your benefit will be. Some scenarios could warrant taking it early—if you need to cover end-of-life care, pay down debt or are unable to work. But generally, if your retirement savings and investments will give you enough to live on, you'll want to cautiously approach taking an earlier, lower Social Security benefit.

Let's consider the pros and cons of claiming the benefit early.

Age 62 is the earliest you can start claiming your Social Security benefits. Claiming at age 62 is considered "early" because you won't get the full amount at that age. Your total benefit isn't available until you reach full retirement age—between ages 66 and 67 depending on your birth year. If you wait until after your full retirement age to claim benefits, the government adds on a monthly bonus that can pile up over time and will max out when you turn 70.

Social Security benefits change depending on when you choose to start claiming Social Security:

• If you wait until your full retirement age, you'll receive 100% of your benefit.
• If you start taking benefits at 62, you'll receive 70% of your benefit.
• For every year you wait to claim benefits past your full retirement age, you'll receive an extra 8%, up to 132% at age 70.

You may be able to receive some of your Social Security benefits as a lump sum. However, it's not an option for those choosing to claim early. Once you hit full retirement age, you can wait to claim any benefits—up to six months—then receive all those payments as one lump sum. For example, if you wait three months past your full retirement age, you can claim a lump sum for up to three months of benefits. If you wait one year to claim, you'll only receive up to six months of benefits as a lump sum.

It's worth speaking with a financial advisor or tax professional as you consider this option. If you do get a lump sum, the rest of your Social Security payments will be lower for the rest of your life. Beyond that, the lump sum may push you into a higher tax bracket, which comes with its own tax implications.

Knowing when to claim Social Security is a challenging decision for many. The answer mainly depends on your ability to continue working, your current retirement savings and your future lifestyle needs and long-term plans in retirement.

• Providing extra income now. If you're weighed down by urgent financial concerns, it may make sense for you to claim benefits early.
• Alleviating stress around healthcare costs. If you have serious health issues or are planning end-of-life care, taking the money now may cover some healthcare costs or allow you to spend more time with loved ones.
• Paying down debt. High-interest debt can take a heavy toll. Tapping into these early benefits could significantly reduce the debt you'll carry later into retirement.
• Replacing some income. There may come a time when you need to stop working earlier than planned. In these cases, claiming benefits can help supplement your income and avoid dipping into your tax-advantaged retirement savings.
• Maximizing a spouse's income. If you're married and both eligible for Social Security benefits, you could strategically time your payments. Higher earners will likely receive higher benefits; the spouse with the lower income could claim first and the higher earner could wait to further maximize their benefits.

• Your benefit is permanently reduced. Once you claim your benefits, you can't increase the amount—even if you stop and restart them later.
• Your spousal benefit could be reduced. Married couples can claim each other's benefits. However, if you take yours early, it may reduce the amount your spouse gets. You'll want to consider the impact on your total retirement income.
• If you're still earning an income, your benefit may be reduced. Many retirees work part-time for income or to stay active. If you've already claimed your benefits and are younger than 66, earning an income may reduce them.

You can begin Medicare at 65. If you aren't working and don't have employer-sponsored insurance, you may need supplemental coverage to bridge the gap. If you've claimed Social Security benefits early but are still working, you may have to pay Medicare tax on those earnings.

If you started and then stopped your Social Security payments, you may have to repay your benefit plus any funds withheld for Medicare premiums.

Social Security leveling (also known as pension leveling) may be an option if you have an eligible pension plan and want to retire early. With it, you can move some of your pension benefits to supplement your Social Security.

It allows you to increase your monthly pension amount while you wait to claim your Social Security benefits, helping to provide a consistent stream of income in early retirement. Your income doesn't dramatically change once you claim benefits, which helps with long-term planning.

However, if you elect this option, your pension income will be permanently reduced once your Social Security income starts.

There's no one-size-fits-all answer to whether you should take Social Security ahead of schedule. Depending on your retirement savings, ability to work and health, it may not be the right fit for you. For some people, however, it's a strategy for making the most of their post-working years.

Talking with a Thrivent financial advisor about your Social Security income and retirement savings can help you determine if claiming benefits early makes sense for you. Financial advisors have tools for running the numbers and can help you envision what your situation will look like with each option.