Suze Orman Said If You Do This, You'll Take a "Costly Cut" to Social Security Benefits

"As she explained, full retirement age (FRA) for most people is between the ages of 66 and 67, with the specifics depending on the year when you were born. You can collect the full standard benefit you are entitled to receive from this entitlement program if you wait to start benefits until your FRA. That standard benefit is based on average wages over the 35 years of your career when your inflation-adjusted income was the highest."

"However, many people start their checks as soon as they can, even though that's well before FRA. Orman said that doing this would lead to a "costly cut," and she's right. You are hit with early filing penalties if you claim benefits ahead of your FRA. Those are equal to 5/9 of 1% per month for each of the first 36 months, and to 5/12 of 1% for any prior month you claim benefits."

Claiming Social Security as early as age 62 can trigger permanent reductions of up to 30% compared with waiting until full retirement age, which is typically 66 or 67 depending on birth year. The full standard benefit is based on the average inflation-adjusted wages over the 35 highest-earning years of a career. Early filing carries specific penalties: 5/9 of 1% per month for each of the first 36 months and 5/12 of 1% for any additional prior month claimed. Those penalties can reduce monthly benefits to about 70% of the standard amount if claimed at 62 rather than at FRA. A caveat notes that people in good health should not settle for reduced benefits and may consider delaying filing to increase their benefit level.

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