Retiring? This Social Security claiming error could affect your income for life

U.S. financial advisor Suze Orman has issued a stark warning regarding the long-term financial implications of claiming Social Security benefits prematurely. She advises against taking benefits between the ages of 63 and 66, as this decision can result in a permanent reduction of lifetime income.

The U.S. Social Security program, managed by the Social Security Administration (SSA), provides financial protection through various programs, with retirement pensions being the most popular. The full retirement age is currently 67, but individuals can claim reduced benefits as early as age 62. The program also offers support for individuals with severe disabilities and for dependents of deceased workers.

Orman's concern stems from the potential solvency issues facing the program. According to Fox Business Network, the Old-Age and Survivors Insurance (OASI) program, which guarantees basic income for retirees, could exhaust its accumulated reserves by December 2032. After this depletion, current tax revenues would only be sufficient to cover approximately 78% of scheduled retirement benefits.

This long-term solvency concern has prompted many individuals to consider claiming benefits earlier. However, Orman emphasizes the significant and irreversible penalty associated with this choice. "Claiming early is basically equivalent to accepting a 30% penalty," she stated. Data from the SSA indicates that starting benefits before age 67 remains a common choice for retirees. Claiming at age 62, for instance, results in receiving only 70% of the full benefit amount, a reduction that is permanently fixed.

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Claiming early is basically equivalent to accepting a 30% penalty.