2017
Oct 13
Ask Cadence: If I choose to take social security early and my benefits get reduced, will they stay reduced forever?
by Cadence WM |

They could, but it depends on what you did to reduce the benefits.  Most people know by now that if you take social security before you reach your full retirement age, which these days for most people is 66 to 67 years old, you will receive reduced benefits.  If you take benefits at age 62 and your full retirement age is 66, your benefits will be permanently reduced by 25%.  Every month after age 62 that you wait to take benefits sees those benefits get closer and closer to 100% of your full social security retirement benefits.  People who take benefits at age 62 when their full social security retirement age is 67 will see their benefits permanently reduced by over 33%.  Taking your benefits before your full social security retirement age will cause a permanent reduction in benefits.

Now, if you do take those benefits early and you continue working, you may further reduce those benefits but only temporarily.  For every $2 you make above roughly $15,720 in the years before the calendar year in which you reach your full retirement age, you see a temporary $1 reduction of your monthly retirement benefits.  It gets a little more forgiving in the calendar year you reach full retirement age because your benefits will be temporarily reduced $1 for every $3 you make above roughly $42,000.  However, those temporary reductions start to be added back into your monthly social security checks once you reach your full retirement age, with the aim of eventually getting all those temporarily reduced benefits back to you.

So, taking benefits early means a permanent reduction of benefits; continuing to make too much after taking those early benefits will result in a further temporary reduction of benefits.  However, and we’d be remiss if we didn’t mention this, if your spouse is receiving spousal social security benefits, the $1 for every $2 or $3 that would also be withheld from his or her benefit checks will never be added back.

For more detail on this topic, please see our February 2016 Cadence Clips newsletter.