Though you're not eligible to collect your full monthly Social Security benefit until you reach full retirement age, you don't have to wait that long to start taking benefits. In fact, you can claim Social Security as early as age 62, which happens to be the most popular age to file.
The problem is that filing early means automatically reducing your benefits, quite possibly for life. How much of a hit are we talking about? If you were born in 1960 or later and therefore have a full retirement age of 67, filing at 62 means slashing your benefits by roughly 30%. This means that if you're looking at a full monthly benefit of $1,400, which is roughly what the average recipient gets today, you'll cut that payment down to just $980 by filing five years early.
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There are plenty of valid reasons to take benefits as soon as possible. If you lose your job and don't have the savings to pay your bills, you're better off filing for Social Security than racking up costly credit card debt to stay afloat. Similarly, if you have health issues and don't think you'll live very long, you'll generally get the highest lifetime benefit by filing as soon as you can.
But if there's one bad reason to claim Social Security early, it's jumping the gun for fear that the program is going broke. Unfortunately, in a Nationwide Retirement Institute study, about one-third of older workers who are planning to take benefits ahead of schedule say they're doing so because they don't believe Social Security will be around at their full retirement age. And that line of thinking could really hurt them in the long run.
Social Security is not going bankrupt
Let's get this out of the way right now: Social Security is not going bankrupt, nor can it ever be bankrupt in theory. The reason? The program is funded by payroll taxes. For every dollar you make this year up to the $128,400 threshold, a portion of that income gets taken in by Social Security to help keep the program alive. Therefore, as long as we have a workforce, the program will keep getting money. But whether it gets enough money to sustain benefits at their current level is a different story.
In the near future, Social Security will start paying out more money in benefits than it takes in, due heavily to the mass exit of baby boomers from the workforce. Once that happens, the program will need to rely on its trust fund to make up the difference. That fund, however, is set to be depleted as early as 2034, at which point benefits might be cut by up to 23% if Congress doesn't intervene with a fix.