Taking Social Security early? Reasons to consider (with pros & cons)

Making the decision about when to start taking Social Security benefits is one of the most important financial choices you'll make in your lifetime. While you can claim your retirement benefits as early as age 62, it's crucial to weigh your reasons for taking Social Security early against the potential drawbacks. If you need to pay down debt, supplement your income or cover unexpected expenses, taking your benefit early could make sense so you can start getting a payment right away, even if it's lower. But if you don't have those needs, it might be smart to delay so you can receive a higher payment for the rest of your life.¹

Let's walk through the pros (and cons) of claiming benefits early.

One of the most compelling reasons to take Social Security early is that it can provide immediate financial relief if you need it. However, it's important to compare the short-term advantages versus the potential long-term impact of reducing your benefits, especially when retirement is right around the corner. Let's look at some reasons you might want to take Social Security early.

Tapping into Social Security early gives you access to a guaranteed source of income sooner, enabling you to pay for day-to-day expenses, have flexibility to enjoy your retirement and lifestyle, and reduce financial stress.

Imagine you are unexpectedly laid off at age 62. You could claim Social Security to help replace some of that lost income. It may not cover all your expenses, but it can provide a cushion while you explore other options. Since it permanently reduces your monthly benefit amount, it's a good idea to consider first if you can replace some income with a part-time job or by tapping some of your savings until you reach your full retirement age.

Claiming Social Security early can provide the funds needed to eliminate high-interest debt. It's often considered one of the main reasons to take Social Security before full retirement age, or FRA. (That's somewhere between ages 66 and 67, depending on when you were born.) Paying off debt can save you significant money in the long run and reduce financial stress in the short term.

Let's say you have high-interest credit card debt. You could claim Social Security early if you're at least age 62 and use that money to increase your monthly credit card payments and pay down the balance faster. A lower balance also helps you cut down accumulated interest so you can get ahead of your debt. But before making this decision, consider if you have any alternative methods to pay off this debt, such as a side gig or reducing expenses elsewhere.

If you're married, drawing Social Security early might help you maximize your benefits as a couple. Strategically timing different ages at which each spouse claims Social Security (typically referred to as a split or staggered strategy) can increase your combined lifetime benefits significantly.

For example, your spouse may decide to take Social Security benefits at 62. They'll receive a reduced amount, but it will provide your household with immediate income. If you then wait to claim benefits at age 70, you'll maximize your monthly benefit. Strategically timing Social Security benefits can allow couples to address current financial needs and secure a larger payout for their later years.

Health can play a major role in the decision to start Social Security. If you have health concerns or physical limitations that affect your ability to work, beginning Social Security early may allow you to retire sooner and without financial worry. If you feel that continuing to work is no longer a viable or desirable option, taking Social Security early can help ease the transition into retirement. The stream of income also may help you cover some of those related health care expenses,That way, you can focus on your health and well-being rather than worrying about paying for care. Just keep in mind the potential long-term effect of reduced benefits and your future health needs, which may include long-term care. You may want to look at additional options, such as health savings accounts (HSAs) or additional insurance options, to help protect your finances. Note: You also won't be able to apply for Medicare coverage until age 65. So you'll want to make sure you can maintain access to health insurance.

Taking Social Security early can help you preserve your retirement savings and allow your other investments to grow, from 401(k)s and IRAs to annuities and cash value life insurance. If the stock market is volatile or if you're concerned about market conditions, starting your benefits at 62 means you don't need to dip into other retirement accounts, helping those assets appreciate over time. It provides you with more flexibility and reduces the pressure on your portfolio in the short term.

For some, waiting to take Social Security until full retirement age or up to age 70 doesn't make sense, especially if you have concerns about your health or family history. The earlier you start claiming, the sooner you can begin enjoying those benefits.

"Some people would rather be cumulatively ahead in the earlier years than cumulatively ahead in the later years," explains Eric Berg, an Advice Service & Digital Tools consultant at Thrivent. "While I'd personally rather be ahead before age 80 than after age 80, if I think I'm going to live to 90 or 100, it still may be best for me to delay."

Calculate your break-even point

Would it be more advantageous for you to delay Social Security and claim a higher benefit later on, or take a smaller benefit sooner? Find out your break-even age to help you potentially receive more total benefits.

See when you'll break even

While there are several enticing reasons to take Social Security early, it's important to consider the potential risks and drawbacks.

The biggest trade-off when you start Social Security before FRA is the reduction in your monthly benefit. If you choose early retirement, your benefit can be reduced by as much as 30% compared to what you would receive if you'd waited until 66 or 67 (depending on your birth year). For many, the reduction can be substantial and may affect your long-term financial security.

Each year you delay taking Social Security past your FRA (up until age 70), your monthly benefit increases by 8%. This delayed retirement credit can add up significantly over time, resulting in a much larger monthly check in the future. If you start early, you miss out on this benefit, which could be a key factor in maintaining a comfortable retirement, particularly if you live longer than expected.

Starting Social Security early may be tempting if you need immediate income, but there's a potential risk that you'll outlive your savings. With the reduction in monthly benefits, you might find that your income doesn't last as long as expected, especially if you live longer than you anticipated. It's important to factor in how long your other retirement savings will last, alongside your Social Security, to ensure you're not facing financial uncertainty later in life.