How Much Will My Benefit Be Reduced If I Start Collecting Social Security Early?

This is a great question! If you've read my post on the Primary Insurance Amount (PIA), you know that the Social Security Administration (SSA) has a set amount defined as your full retirement benefit. This is the amount you'll receive if you wait until your full retirement age (FRA) to claim your benefit. However, many people choose to claim their benefits early. So, what are the consequences of doing so?

The SSA uses three separate calculations to determine how much your benefit will be reduced if you claim early. These calculations are based on the number of months you claim before your FRA, and they can be a bit confusing. Let's break them down:

1. 0 to 36 Months Early: If your FRA is 67, you can claim your benefits as early as age 62. For the first 36 months (from age 64 to 67), your benefit will be reduced by approximately 6.67% per year. This means a total reduction of about 20% over those three years.

2. More Than 36 Months Early: For the period from age 62 to 64, your benefit will be reduced by about 5% per year. This adds up to a 10% reduction over those two years.

3. After Full Retirement Age: If you wait to claim your benefits after your FRA, your benefit will increase by 8% per year until you reach age 70. This means you can get an extra 24% added to your benefit by waiting until age 70 to file for Social Security.

So, if you decide to claim your benefits five years early, your total reduction will be about 30%. These reductions are calculated monthly, so you can find out the exact monthly reduction by dividing these percentages by 12.

Remember, while claiming early reduces your monthly benefit, waiting can significantly increase it. It's essential to consider your financial situation and health when deciding the best time to start collecting Social Security.