Social Security is just six years away from a potential benefit cut of 28%, according to recent research from the Congressional Budget Office (CBO). This is understandably worrying, especially if you expect to be heavily dependent on your checks in retirement.
You might wonder whether the possible cut means you should sign up early rather than putting off your application so you can increase your checks. There's a lot we still don't know, but the answer to this question at least seems pretty clear.
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Under the current Social Security benefit formula, the government first calculates the amount that you qualify for at your full retirement age (FRA). This is 67 for most people today. Then, it adjusts your benefit up or down based on your age at sign-up.
Claiming early shrinks your checks by up to 30% while delaying Social Security increases your checks until you qualify for your maximum benefit at 70. This is 124% of the amount you'd qualify for at your FRA of 67.
While many choose to claim benefits early, delaying your Social Security application can lead to a larger lifetime benefit. However, it also means you'll have to cover more years of living expenses on your own.
With changes to the program on the horizon, it's only natural to wonder whether the same rules will apply in a few years. You might also question whether you should apply sooner rather than later to lock in your benefit amount before cuts happen, but that might not be your best move.
We don't yet know how the government will address Social Security's funding crisis. Benefit cuts are on the table, but it's also possible that it will try to increase funding for the program, perhaps by raising taxes, to avoid cuts.
Only time will tell. But there's no reason for the government to drastically alter the benefit formula to change the way it handles your claiming age. Early claimers will likely still get smaller monthly checks than those who delay their applications, even after the 2032 deadline has passed.
So rather than basing your benefit on what Social Security is likely to do, focus on what makes the most sense for you. If you have a short life expectancy or can't work and need Social Security to cover your bills, signing up early could make sense. But if you can afford to wait, you may get a larger lifetime benefit by delaying checks for a few months or years.
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There's a lot we still don't know, but this decision may not be as complicated as you think.
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