Weighing the risks of claiming Social Security early

[UNITED STATES] Amid growing concerns about the long-term solvency of Social Security, more Americans are opting to claim retirement benefits early. But financial experts warn that making that move too soon may not be in retirees' best interest.

Persistent funding issues have sparked fears that future Social Security benefits may be reduced—or that the program may struggle to pay them at all. As a result, some workers are choosing to collect their benefits earlier than planned, despite the trade-off of receiving smaller monthly payments for life.

The roots of the program’s financial troubles lie in shifting demographics. With more retirees drawing benefits and fewer workers contributing, the strain on the system continues to mount. The Congressional Budget Office reports that the worker-to-beneficiary ratio has fallen from 5.1 in 1960 to just 2.8 today. Though various fixes have been proposed—ranging from raising the payroll tax cap to adjusting cost-of-living calculations—no major reforms have passed in recent years.

In their 2024 report, Social Security trustees projected the trust fund backing retirement benefits could be depleted by 2033, at which point only 79% of scheduled benefits would be payable. Updated projections for 2025 are still pending.

Operational changes at the Social Security Administration have only added to public unease. Budget and staffing cuts have led to long wait times and delayed processing for disability claims and other services. A 2023 Inspector General report revealed that average wait times for phone support exceeded 30 minutes, with some callers waiting over an hour. These service challenges contribute to the growing skepticism surrounding the program.

A recent survey from Allianz Life found that 64% of Americans worry more about outliving their savings than dying. Social Security’s perceived inadequacy ranked as the second-largest financial concern after inflation.

On average, Social Security replaces about 40% of a worker’s pre-retirement income, according to the SSA. Any future legislative fixes to the program could require higher taxes or reduced benefits.

While some fear significant cuts, many economists believe future changes will be moderate. The 1983 reforms—which included gradually raising the retirement age and taxing benefits for higher earners—offer a historical example of adjustments rather than drastic reductions. Still, political stalemate in Washington has left both current and future retirees uncertain.

“If benefits are cut or appear under threat, it amplifies the anxiety around running out of money,” said Kelly LaVigne, vice president of consumer insights at Allianz Life Insurance Company.

This anxiety has prompted many to claim early. “I’ve heard clients say, ‘I want to start taking it now before it’s taken away from me,’” said Andrew Herzog, a certified financial planner and associate wealth manager at The Watchman Group in Plano, Texas.

Herzog typically reassures clients that a complete loss of benefits is unlikely—especially for those nearing or already in retirement. Even former President Donald Trump has pledged not to cut benefits for current retirees. While benefit reductions for future retirees are possible, a total collapse of the program remains improbable.

Still, emotional factors often outweigh financial reasoning. A study from the National Bureau of Economic Research found individuals who lack trust in government programs are 20% more likely to claim early, despite the financial downsides.

Those considering early retirement at age 62—the earliest eligibility age—should understand the trade-offs. Herzog explains that doing so locks in a reduced monthly benefit for life. For those with a full retirement age of 66, claiming at 62 results in a 25% reduction. For those with a full retirement age of 67, the reduction jumps to 30%.

Despite these drawbacks, most Americans still claim before full retirement age, according to the Congressional Research Service. Delaying benefits, especially up to age 70, can significantly increase monthly payouts. Each year of delay beyond full retirement age yields an 8% increase. For those with a retirement age of 66, that could mean a 32% higher monthly benefit; for those with an age of 67, a 24% boost.

“For those expecting to live into their 80s or beyond, delaying to age 70 can make financial sense,” Herzog said.

That said, the right decision depends on several personal factors—health, employment status, access to other income sources, and peace of mind, Herzog noted. Even postponing a claim by a single month can result in a modest increase.

Research from Vanguard supports the idea that individuals with long life expectancies should prioritize avoiding the risk of outliving their savings by delaying benefits. On the other hand, those with shorter life expectancies may need to weigh the risk of receiving a smaller lifetime payout by waiting.

For married couples, coordination is especially important. A lower-earning spouse might claim earlier, while the higher earner delays to maximize potential survivor benefits. Nearly half of all elderly Social Security beneficiaries rely on the program for at least half of their income, highlighting the importance of smart claiming strategies.

Claiming early can also offer advantages. Spreading the tax burden over more years, lowering the portion of Social Security benefits subject to taxation, and avoiding higher Medicare premiums tied to income levels (known as IRMAA) are among the potential benefits, according to Vanguard. Still, delaying can offer significant protection—especially for surviving spouses or those who may face unforeseen financial hardships.