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We’re just a few short weeks away from learning what kind of a cost-of-living adjustment (COLA) Social Security beneficiaries can expect in 2023. While that’s a pretty big deal, it’s not the only exciting change coming to the program next year.

Workers who claim Social Security early may notice a difference in their checks that has nothing to do with the COLA. Below, we’ll look at what this is and who it applies to.Businessperson looking at paperwork.

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What does it mean to claim Social Security early?

You can sign up for Social Security as early as 62. But you must wait until your full retirement age (FRA) to claim the benefit you’ve earned based on your work history. The table below will help you figure out your FRA.

Birth Year Full Retirement Age (FRA)
1943 to 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

Data source: Social Security Administration.

Claiming benefits before your FRA is considered claiming early. Doing so will net you more checks, but each check you get will be smaller. If you claim at age 62 and your FRA is 67, you will only get 70% of your full benefit per check, or 75% if your FRA is 66.

Claiming Social Security early also carries another problem for those still working. But 2023 will buy them a bit more breathing room before they have to worry about it.

This could help you keep more of your Social Security checks

The Social Security Administration withholds some retirement benefits from early claimers whose annual income is too high. In 2022, you lose $1 for every $2 you earn over $19,560 if you will be under your FRA for the whole year. On the other hand, if you’ll reach your FRA in 2022, you’ll lose $1 for every $3 you earn over $51,960, assuming you earn this much before your birthday. This is known as the Social Security earnings test. The government doesn’t withhold any money from the Social Security checks of those at or over their FRA, regardless of income.

If the government withholds some money from your checks, it’s not gone forever. Once you reach your FRA, it recalculates your benefit and gives you slightly larger checks to make up for what it previously withheld. That said, it can still be frustrating to lose some of your Social Security benefits, even for a short time.

Fortunately, in 2023, the thresholds for the earnings test are most likely going to increase. That means that while claiming Social Security before your FRA, you’ll be able to earn a larger amount of money before you have to worry about the government taking anything out of your checks.

The government hasn’t officially announced the new income thresholds for 2023 yet, but they climb every year, so we can expect them to be higher than the limits listed above. That said, some high-earners could still receive smaller checks due to the earnings test if they’re claiming benefits under their FRA. Those who want to avoid this might consider delaying Social Security benefits altogether.

Doing this will lead to even more money when you eventually sign up. For every month you delay, Social Security increases your checks until you reach your maximum benefit at 70 — if your FRA is 67, that’s 124% of your full benefit per check, or 132% if your FRA is 66.

Delaying could be the wiser move for your finances if you expect to live into your 80s or beyond and are comfortable paying your bills without help from Social Security in the meantime. But if you want to claim early, just be aware of the earnings test and what it could do to your benefits. Plan accordingly, so you aren’t surprised if the government starts withholding some of your checks.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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