When Clients Claim Social Security Early, Take These Steps to Avoid Surprises

What You Need to Know

Welcome to Connecting the Dots, the column where Marcia Mantell discusses real-life decisions around Social Security claiming and retirement.
While the share of retirees claiming their benefits early has fallen in recent decades, it has ticked up since the pandemic.
Claiming Social Security before 65 automatically triggers other benefits; failure to take necessary steps could lead to tax consequences.

Most financial advisors recommend that clients wait to claim Social Security retirement benefits until full retirement age or up to age 70. That is sound advice. But since the COVID-19 pandemic, more baby boomers are electing to start benefits earlier. 

When claiming before age 65, they inadvertently turn on other benefits and can miss taking specific actions with Medicare and health savings accounts. Mistakes lead to unnecessary surprises and tax issues.

A Look at the Data

The Social Security Administration’s OASDI Benefits Awarded: Retired Workers tables report when men and women started claiming benefits. A recently released table shows claiming ages between 1998 and 2022, a period in which claiming patterns have changed significantly. 

A few examples:

In 1958, 58% of men claimed at 62. In 2022, only 28% claimed that early.
In 1958, 62% of women claimed at 62. In 2022, fewer than 30% did so.
Between 1998 and 2007, 79% of men claimed benefits before their FRA (65 to 65 and 10 months). 
In the same sequence, 82% of women claimed before their FRA.

The first boomers reached age 62 in 2008, just as the Great Recession was gripping the United States. 

In 2008, 82% of men claimed between 62 and FRA versus 60% in 2022.

In 2008, nearly 85% of women claimed between 62 and FRA versus 62.5% in 2022.

Overall, baby boomers have made remarkable adjustments toward waiting to claim.

COVID-19 Hinting at a New Trend

As younger boomers approached retirement, they received better advice from their financial advisors about the value of waiting. Social Security also stopped advocating for early claiming.

However, the pandemic still affects older workers in significant ways. And we see the claiming trend turning — more boomers are once again claiming earlier than is ideal.

Time will tell if this uptick is isolated to COVID concerns. 

Surprises When Claiming Before 65

Clients who claim between 62 and 64 and eight months receive a Welcome to Medicare packet about three months before the month they turn 65. They also automatically enrolled themselves in Medicare Parts A and B when they claimed Social Security.