The decision to apply for Social Security benefits is not a simple one. This is because your filing age has an effect on the amount of money you receive each month from the program.
Age 62 is the earliest age at which you can apply for benefits. However, until you reach full retirement age, or FRA, you are not entitled to receive your full monthly benefit based on your earnings history. FRA begins at the age of 66, 67, or 66 and a specified number of months, depending on your birth date.
You may now have your reasons for filing for Social Security benefits ahead of the FRA deadline. Perhaps your health has deteriorated to the point where you are unable to work full-time. Alternatively, you may wish to use those benefits to pay for travel while you are still young enough to enjoy it to the fullest.
For some people, filing for Social Security early is the prudent course of action. However, if you’re going to take that route, it’s critical to understand these specific rules.
1. The lower benefit you lock in will be your permanent benefit.
Certain individuals believe that if they file for Social Security early and receive a reduced monthly benefit, their benefit will be restored to its full amount once they reach FRA. However, this is not how the program operates. If you apply for Social Security prior to FRA, you will be permanently locked into the lower monthly benefit (not including the annual boost you might get as cost-of-living adjustments are applied across the board).
There is one exception at the moment. If you withdraw your Social Security claim within a year and repay all benefits received during that time period, you can reverse your filing and reapply at a later age. However, repaying up to a year’s worth of benefits is not easy, so if you file early, assume that the monthly benefit you begin with will always be the one you receive.
2. If you work and earn an excessive amount of money, some benefits may be withheld.
After attaining FRA, you can earn any amount without jeopardizing your Social Security benefits. However, if you worked and received Social Security benefits prior to FRA, you risk having some benefits withheld if your income exceeded the annual earnings-test limits.
These limits are now adjusted annually. This year, you can earn up to $19,560 without jeopardizing your benefits. From there, you risk having $1 of your earnings deducted from Social Security for every $2 earned.
This year, if you reach FRA, the limit increases to $51,960. From there, you risk having $1 of your earnings deducted from Social Security for every $3 earned.
3. Your lower benefit may result in a decrease in your spouse’s survivors benefits.
If you expect your spouse to outlive you by many years, you may want to reconsider filing for Social Security early. If you lock in a lower monthly benefit, you will leave a lower monthly benefit to your surviving spouse for the remainder of their years.
This may not be an issue if your spouse was a high earner and thus entitled to a sizable Social Security benefit of their own. However, it is something to consider if you are the higher earner.
Recognize the rules
It’s wonderful that you have options when it comes to filing for Social Security. However, if you intend to file for benefits early, ensure that you are fully aware of the applicable rules.