There’s an alarming reason retirees take Social Security when they do

Choosing when to start taking Social Security is one of the most important retirement decisions you’ll make, and it will affect your monthly income for the rest of your life.

If you claim earlier than full retirement age (which is age 67 for everyone born in 1960 or later), your benefit will be permanently reduced by up to 30%. You can also defer benefits until age 70 to earn a bonus of at least 24% on top of your full payouts.

Many future retirees put a lot of thought into this decision, researching all their options and weighing the pros and cons of each choice. But when it comes to actually claiming, there’s an alarming trend among older adults.

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The decision may not be in your control after all

In an ideal world, all major life decisions would be fully within one’s control. But many people don’t have that luxury, and Social Security decisions are no different.

When asked why they chose to take benefits at the age they did, 47% of current recipients said it was because of life events beyond their control, according to a 2024 Nationwide survey Pension Institute. The most common reasons were health problems and financial struggles, while others admitted that job loss was the reason they started receiving benefits.

In fact, it is more common for people to file for these reasons than for planned purposes. While 23 percent of survey participants said they chose their claim age as part of their overall retirement plan, 26 percent said they filed after experiencing health or financial problems.

This can be alarming news for many older adults, especially if Social Security is an important part of your retirement plan. If you end up claiming sooner than expected, for reasons beyond your control, it could wreak havoc on your finances.

How much will early claim affect your benefit?

The difference between claiming early and deferring benefits may not seem like much, but it can seriously affect your monthly finances.

According to December 2023 data from the Social Security Administration, the average 70-year-old retiree collects about $2,038 per month in benefits. At ages 67 and 62, those averages are just $1,884 and $1,298 per month, respectively.

Claiming even a year or two early can reduce your monthly benefits by hundreds of dollars. If Social Security will be a significant source of income in retirement, it pays to have a backup plan in case you need to file earlier than expected due to health problems, financial challenges, job loss, or other life events .

What can you do right now?

Of course, there’s no way to know if life will throw you curves. But you can play it safe and assume that you may need to take Social Security sooner than expected.

Perhaps the best thing you can do now is reduce your reliance on your benefits. Social Security can still be an important part of your retirement plan, but the more cushion you can build outside of your benefits, the less your claim decision will affect your financial health.

This could involve growing your savings, for example, or creating a source of passive income to cover your nest egg. You might even consider more drastic measures, such as downsizing or moving to a more affordable area, to cut costs and help your savings go further.

Life can be unpredictable and can throw a wrench in your plans at any time, no matter how prepared you are. But if you at least think about the possibility of being forced to claim Social Security sooner than you expect, you can take steps to keep your retirement as secure as possible.