Three Reasons to Take Social Security Early and Key Considerations

Deciding when to start collecting Social Security is one of the most important financial choices retirees face. While waiting until full retirement age or beyond increases monthly benefits, some individuals may find that claiming early better suits their circumstances.

Several factors make early filing a practical choice, but there are also trade-offs. Understanding these motivations and potential drawbacks helps ensure an informed decision.

Minimum Age and Eligibility Criteria for Early Filing

The earliest age to claim Social Security retirement benefits is 62, but this results in a permanently reduced monthly payment. The Social Security Administration (SSA) calculates the reduction based on the number of months before full retirement age (FRA). For those born in 1960 or later, FRA is 67, meaning a claim at 62 results in a 30% reduction in monthly benefits.

To qualify, a worker must earn at least 40 credits, equivalent to about 10 years of work. In 2024, one credit is earned for every $1,730 in wages, with a maximum of four credits per year. Those who haven’t met this threshold cannot claim benefits.

Spousal benefits allow early filing but with similar reductions. A spouse claiming at 62 instead of their FRA receives only 32.5% of the higher-earning spouse’s full benefit instead of the maximum 50%. Divorced individuals may claim benefits based on an ex-spouse’s record if the marriage lasted at least 10 years and they remain unmarried.

Three Key Motivations to Start Collecting Before Full Age

Claiming Social Security before FRA can be beneficial in certain situations. While the monthly benefit is lower, some prioritize immediate access to funds over long-term maximization. Financial needs, employment status, and health considerations often influence this decision.

Financial Flexibility

For those with limited savings, claiming Social Security early provides necessary income for essential expenses like housing, healthcare, and groceries. This can be especially important for retirees without significant investments or pensions.

Taking benefits early can also help preserve tax-advantaged retirement accounts like 401(k)s and IRAs, allowing those funds to grow longer. Delaying withdrawals from a traditional IRA extends tax-deferred growth, which may be beneficial depending on market conditions. However, this must be weighed against the permanent reduction in Social Security payments. Those with serious health concerns or a family history of shorter life expectancy may also find it advantageous to collect benefits sooner.

Decreased Work Hours

Individuals transitioning to part-time work may use early Social Security benefits to supplement lost wages. This can be particularly helpful for those in physically demanding jobs who can no longer work full-time.

However, the SSA imposes an earnings limit for those who claim before FRA. In 2024, individuals earning more than $22,320 per year while receiving early benefits will have $1 withheld for every $2 earned above this threshold. These withheld benefits are recalculated and added back once FRA is reached. Those planning to work part-time should carefully assess their expected earnings to determine whether early filing is beneficial.

Specific Personal Factors

Health and life expectancy play a significant role in the decision to claim early. Those with serious medical conditions may prioritize receiving benefits sooner rather than delaying for a higher monthly amount. If someone anticipates a shorter retirement period, collecting benefits early can ensure they receive more total payments over their lifetime.

Marital status also affects the decision. A lower-earning spouse may claim early while the higher-earning spouse delays, maximizing household benefits. Divorced individuals who qualify for benefits based on an ex-spouse’s record may find early filing advantageous if they need immediate income.

Another consideration is the availability of other retirement assets. Those with substantial savings or pensions may not need to rely on Social Security for primary income, but others with limited resources may find early benefits necessary. Evaluating financial health, expected longevity, and household income sources can help determine whether early filing aligns with long-term goals.

Tax Withholding and Penalties

Social Security benefits may be subject to federal income tax, depending on total income. The IRS uses a formula called “combined income,” which includes adjusted gross income, nontaxable interest, and half of Social Security benefits. If combined income exceeds $25,000 for single filers or $32,000 for married couples filing jointly, up to 50% of benefits may be taxed. Those exceeding $34,000 (single) or $44,000 (married) may see up to 85% of benefits taxed.

To avoid a surprise tax bill, recipients can request that 7%, 10%, 12%, or 22% of their monthly payment be withheld for federal taxes. Unlike wages, Social Security does not automatically withhold taxes, so recipients must opt in.

State taxation varies, with 12 states taxing Social Security benefits to some extent. These states—such as Colorado, Minnesota, and Utah—often follow federal taxation rules but may offer exemptions or deductions based on income level. Residents should check their state’s specific guidelines to determine if their benefits will be taxed.

If Social Security is a primary income source, recipients should be mindful of estimated tax payments. The IRS requires quarterly payments if total tax liability exceeds $1,000 after withholdings. Failing to make these payments can result in interest charges and penalties. This is particularly relevant for retirees with investment income, rental earnings, or other taxable sources that increase their overall tax burden.

Coordinating with Other Income Sources

Balancing Social Security benefits with other income streams requires careful planning. Many retirees rely on pensions, annuities, investment accounts, and part-time work, each of which interacts differently with Social Security.

The timing of withdrawals from tax-advantaged accounts such as 401(k)s and traditional IRAs can significantly impact overall tax liability. Required Minimum Distributions (RMDs), which begin at age 73 under current IRS rules, may push retirees into a higher tax bracket, increasing the portion of Social Security benefits subject to taxation.

Investment strategy also plays a role. Retirees with taxable brokerage accounts may benefit from drawing on Social Security first while allowing investment portfolios to grow. Capital gains taxes on long-term investments are typically lower than ordinary income tax rates, so a structured withdrawal plan can minimize total tax liability. Conversely, those with large capital gains might defer Social Security and instead realize gains strategically over multiple years to avoid triggering higher Medicare premiums under the Income-Related Monthly Adjustment Amount (IRMAA) thresholds.