Reduction Months

Reduction months are an important part of how Social Security benefits are calculated for individuals who retire early. In this article, we’ll define the term “reduction months” and explain their impact on monthly Social Security payouts. 

Key Takeaways

  • Reduction months begin with the first month an individual is entitled to reduced benefits, up to the month in which they reach full retirement age
  • Monthly Social Security retirement benefits are reduced by a certain percentage for each reduction month
  • Taking retirement early can reduce the amount an individual receives in monthly Social Security retirement benefits by as much as 30%
  • It is recommended to plan retirement carefully in order to maximize your Social Security retirement benefit by limiting the number of reduction months 

What Are Reduction Months?

In the context of Social Security benefits, reduction months are a number of months beginning with the first month an individual is entitled to reduced benefits, up to but not including the month in which they reach their full retirement age.

Reduction months are a concept relevant to the age at which a person begins to take Social Security retirement benefits. Individuals who qualify for Social Security retirement benefits are entitled to begin taking benefits as early as age 62. However, they are not considered to reach “full retirement age” until age 66 to 67, depending on their birth year. 

If a worker takes retirement benefits prior to full retirement age, their monthly benefit will be permanently reduced. The exact amount by which the benefit is reduced is calculated based on reduction months. For each reduction month, retirement benefits will be reduced by a small fraction of a percent. 

The table below illustrates by how much Social Security retirement benefits are reduced for workers who begin taking benefits at age 62. Note that this table is based on an example primary insurance amount of $1,000 per month. 

Birth year Full retirement age Number of reduction months Percent reduction Benefit amount (reduced from $1,000)
1943 - 1954 66 48 25% $750
1955 66 and 2 months 50 25.83% $741
1956 66 and 4 months 52 26.67% $733
1957 66 and 6 months 54 27.5% $725
1958 66 and 8 months 56 28.33% $716
1959 66 and 10 months 58 29.17% $708
1960 and later 67  60 30% $700

As you can see in the table, taking retirement benefits early results in a substantial reduction in monthly benefits. For a person born in 1960 or later, taking retirement benefits at age 62 can reduce monthly benefits from $1,000 per month to $700 per month.

Because of the impact of taking Social Security retirement benefits early, it’s important for retirees to plan retirement carefully and begin taking benefits later, if possible. Working with a Social Security professional like a financial planner can be incredibly helpful for determining at what age it is wisest for you to begin taking Social Security benefits.

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