How to Collect Social Security Before Retirement Age

Figure it out: Collecting Social Security early can cost you.

A calculator, a pen, glasses and a book image by Julien BASTIDE from

People approaching retirement age face a tough decision regarding their Social Security retirement benefit. They must decide whether to start collecting early or wait until full retirement age, which for people retiring in 2012 is 66. The Social Security Administration allows you to start collecting retirement benefits when you turn 62, but you pay a heavy penalty.

File Application

If you want to start collecting Social Security before turning 66, you can apply online, by phone, or in person at any Social Security office. You should apply at age 61 and 9 months if you want your benefits to start immediately after you turn 62. Regardless of how you apply, you must fill out the application form and supply originals or certified copies of your Social Security card, birth certificate or other proof of your age, U.S. citizenship or legal alien status, your military service papers if you were in the military before 1968, and a copy of your W-2 form or self-employment tax return for the previous year. Your documents will be returned to you.

Benefit Qualification

To be eligible for any retirement benefit, you must have worked at least 10 years in jobs where your pay was subject to Social Security payroll taxes. You qualify by accumulating 40 Social Security work credits. As of 2012, you get one credit for each $1,130 in earnings that are subject to FICA or self-employment tax. If you earned $4,520 or more, you will get the maximum four credits per year. You don’t get credits for unearned income from interest or dividends or from any other source that’s exempt from Social Security taxes. Accumulating more than 40 work credits doesn’t increase your retirement benefit, which will be based on your average earnings for the years you worked.

Reduced Benefit

If you start collecting your Social Security retirement benefit at age 62, your monthly benefit will be 25 percent less than if you wait until you're 66. This reduction in your benefit will last for as long as you live. If you start collecting at age 63, your benefit is reduced by 20 percent. If you wait until 64 to file for benefits, you lose 13.3 percent. Retiring at 65 costs you 6.7 percent of your benefit. For those born in 1960 and later, full retirement age will be 67. For this group, claiming Social Security at age 62 will result in a 30 percent reduction from the benefit they would have collected by waiting until they turned 67.

Earnings Limit

If you keep working while collecting early Social Security benefits, you will be subject to penalties if you earn too much. As of 2012, your annual earnings limit is $14,640 for the years you are 62 through 65. Social Security will reduce your benefit by $1 for every $2 you earn above that limit. In the year you reach your full retirement age, the limit rises to $38,880, and you lose $1 in benefits for each $3 earned above that limit. After you reach full retirement age, there is no limit on your annual earnings regardless of when you started collecting benefits.