Claiming Social Security benefits as early as possible can be tempting. Starting at age 62 means you get checks over a longer period, which could even let you retire sooner when combined with your savings. However, jumping at the first chance to claim these benefits comes with its own set of pitfalls.
When you apply at 62, you risk seeing your monthly payments reduced by as much as 30 percent. There’s also a little-known rule that might end up costing you even more.
### Working While Claiming Social Security Could Surprise You
In 2023, about a quarter of people chose to start their Social Security benefits at 62, making it a popular choice. Nevertheless, many Americans are opting to retire later. You can indeed claim benefits while still in the workforce.
But here’s the catch: the earnings test. If your job income surpasses certain limits, you’ll see a reduction in your benefit checks. In 2025, should you be under your full retirement age (FRA) for the full year, you’ll lose $1 in Social Security for every $2 earned over $23,400. Currently, for most workers, FRA is 67, but can be as young as 66 for some older retirees.
If 2025 is the year you hit your FRA, the penalty lessens—you only lose $1 for every $3 made over $62,160, but only if your earnings surpass this amount before reaching FRA.
For those with higher incomes, it might mean that in some months, you won’t receive a check at all because of the earnings test. It can be a frustrating experience, particularly if you’re relying on those checks for expenses. But there is light at the end of the tunnel.
Once you reach your FRA, the government stops penalizing your earnings from work, no matter your salary. They’ll also adjust your future benefits upward to compensate for any funds previously withheld. This adjustment could mean a significant increase in your benefits, especially if substantial sums were held back earlier.
### How to Sidestep the Earnings Test
Recovering withheld benefits at FRA is reassuring, but remember, it won’t be as much as if you’d delayed claiming until the FRA in the first place. The earlier you claim, the smaller your checks will be.
If you’re still on the fence about claiming and don’t need the money immediately, it might be worth holding off until you either retire fully or reach FRA. This approach spares you from the penalty associated with early claiming and the headaches of the earnings test.
Another strategy is cutting back on work hours to lower your earnings. This gradual transition into retirement lets you supplement your decreased wages with Social Security, avoiding earnings test penalties by keeping yearly income under $23,400.
Sometimes, thwarting the earnings test entirely isn’t possible. But even in these instances, you’ll see withheld amounts returned when you hit FRA, and annual increases in test limits mean that even if you lost benefits one year, you might not in future years.
