What Are the Dangers of Taking Social Security Early?

by Michael Keenan
Taking benefits early can reduce your spouse's survivors benefit.

Social Security benefits provide income for you during retirement, with the amount based on your years of work and the Social Security taxes you paid on your earned income. Though some people say to take the money and run before Social Security goes bankrupt, there are several dangers in cashing in too early.

Lower Benefit

The earlier you start taking Social Security payments, the smaller your monthly benefit will be. According to Fidelity, your monthly benefit is reduced by about 25 percent if you begin taking it at age 62 -- the youngest you can start receiving it -- rather than at 66 if that's your full retirement age. Full retirement age is 67 if you were born in 1960 or later. Your benefits are calculated to total the same amount over the remainder of your life. So if you die sooner than expected, you might receive more by taking payments early, even though each payment is smaller.

Excess Income Reductions

When you take your Social Security benefits before your full retirement age, you might find your benefits reduced if you make too much money from other sources, at least until you reach full retirement age. For example, if you're younger than full retirement age in 2013, the Social Security Administration reduces your benefits by $1 for every $2 over $15,120 that you earned during the year. However, that isn't all bad: If some of your benefits are withheld because you're still working, you could receive a higher benefit amount once you reach your full retirement age.

Outliving Your Savings

Even when you hit 62 years old, 90 can seem far away. However, if you've locked yourself in to the lower benefits and you go on to live for a long time, you're likely to regret cashing in early. There's no guarantee that you're going to live to 70, much less 80 or 90. However, with people living longer and longer, you might prefer to be safe rather than to risk your benefits being too small to cover your expenses when you're old.

Spousal Benefits

If you're married, the chances are even greater that at least one of you will live into your 80s or 90s. But if your spouse is using your work record to get benefits, you could be harming her future benefit amounts by taking your benefits early. If you die before your spouse, she might be eligible for survivors benefits. But if you take your benefits early, the Social Security Administration will pay a reduced benefit to your spouse.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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