Social Security benefits are adjusted for inflation, provide lifetime income, and continue regardless of stock market performance. Social Security is also one of the most misunderstood retirement programs, and the mistakes people make with it are permanent.
In a Vanguard investor-education article on when it is best to begin claiming Social Security, Ed Campagna, a Certified Financial Planner and Senior Financial Advisor at Vanguard, outlines the timing errors, earnings penalties, and spousal missteps that can shrink lifetime benefits.
Widespread confusion about the One Big Beautiful Bill Act has also left many filers misunderstanding how their federal benefits are taxed.
For those who have earned the maximum subject to social security tax each year since age 22 and retire in 2026, the gap between claiming at 62 and claiming at 70 reaches roughly $26,544 per year, the difference between a $2,969 monthly benefit at 62 and a $5,181 monthly benefit at 70, according to the Social Security Administration.
Why claiming Social Security at 62 can cost top earners over $26,000 a year
Social Security allows Americans to start collecting at age 62, but filing at that age permanently cuts the monthly benefit by roughly 30%, Vanguard noted.
For anyone born in 1960 or later, the full retirement age is 67, and benefits grow by 8% for each year retirement is delayed until age 70.
The maximum monthly benefit at full retirement age in 2026 is $4,152, which means even top earners face a ceiling.
A worker who paid the maximum Social Security tax throughout their career would collect $2,969 per month at 62 in 2026, compared to $5,181 at 70, a monthly difference of $2,212 that compounds for the rest of the retiree’s life, SSA figures show.
The reduction is permanent because every future cost-of-living adjustment compounds from the lower starting base, meaning the gap widens rather than closes with each passing year.
Campagna says that while many people claim Social Security as early as possible, a more deliberate timing decision can affect the size of their lifetime benefit.
Many people think when to start taking Social Security is a straightforward decision—and not surprisingly, many of them choose to take it as soon as possible. However, being strategic about taking Social Security can help you optimize future payments and obtain greater peace of mind.
Jason Fichtner, a former acting deputy commissioner and chief economist at the SSA, told CNBC that filing before age 70 amounts to accepting a permanent penalty.
When comparing a claim at 62 versus one at 70, AARP calculates what is called the break-even age–the age at which the cumulative higher monthly benefits from a delayed start equal the cumulative lower monthly benefits from an earlier start–as roughly 80 years. This means retirees who live past their early 80s typically collect more in lifetime benefits by waiting.
Fichtner himself has argued that break-even analysis is the wrong framing for the claiming decision, telling CNBC that “claiming at any age before age 70 is a penalty.”
The 2026 earnings test can temporarily withhold benefits for early filers
Retirees who claim benefits before their full retirement age and continue working will face a separate reduction through the Social Security earnings test in 2026.
The SSA deducts $1 in benefits for every $2 earned above $24,480 for those under full retirement age for the entire year, the agency confirmed.
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For beneficiaries reaching full retirement age during 2026, a higher threshold of $65,160 applies, with $1 withheld for every $3 above that amount.
Those withheld amounts are not lost, because the SSA adjusts payments upward once a beneficiary reaches full retirement age.
Spousal and survivor coordination could protect a household for decades
Campagna also stressed spousal and survivor coordination in his guide, calling it one of the most overlooked steps for married couples approaching retirement.
When one spouse has significantly outearned the other, delaying the higher earner’s claim allows the survivor benefit to grow alongside the higher earner’s earnings, the firm indicated.
Survivor benefits are tied to the deceased spouse’s benefit level, so an early claim by the higher earner permanently reduces the surviving partner’s income, the firm explained.
Divorced individuals whose marriage lasted at least 10 years and who are currently unmarried may claim retirement benefits on a former spouse’s record, the SSA confirmed.
New tax law confusion is leading retirees to misread benefit taxation
The One Big Beautiful Bill Act, signed into law in 2025, did not eliminate federal taxation of Social Security benefits despite widespread online claims.
Financial advisor Jay McGowan of The Welch Group confirmed to WAFF that nothing changed about how benefits are taxed under the new legislation.
The law created a temporary $6,000 senior deduction per eligible filer age 65 and older, Fidelity explained. Married couples filing jointly can claim up to $12,000 when both spouses are 65 or older.
The deduction begins to phase out for single filers above a modified adjusted gross income (MAGI) of $75,000, and for joint filers above a MAGI of $150,000, and it phases out entirely at $175,000 and $250,000, respectively, and the deduction expires after the 2028 tax year.
What Vanguard says to review before filing for Social Security
Campagna outlined several pre-filing actions in his guide that retirees can take to avoid locking in a mistake that compounds for decades.
Retirees and pre-retirees nearing their 60s should check their earnings record annually by logging into their “my Social Security” account at ssa.gov, the firm recommended.
Missing wages or reporting errors in that record can interfere with the benefit calculation without the filer ever knowing, the firm explained.
Households should also model their break-even age by comparing total lifetime income at 62, full retirement age, and 70, Campagna suggested.
Related: How much Social Security crisis will cost your retirement
