Should You Claim Social Security Early if You Get Laid Off?

Key to the claiming decision is “to maximize the amount of money coming into your household over your lifetime, not, ‘What do I need right now?’ It’s important to have that longer view,” Ritter adds.

The biggest risk in retirement, he says, is longevity risk — the prospect of outliving your money. “The best way to mitigate that risk is to have the highest guaranteed lifetime, inflation-adjusted income you can get, and that is Social Security,” especially if you can delay claiming until age 70, when you can lock in your maximum monthly payment.

Claiming sooner can also mean a smaller survivor benefit for your spouse if you die first. “Taking Social Security early has a bigger impact on married couples,” Allen says.

Consider the alternatives

After a job loss, it’s important to explore other sources of income before tapping Social Security, says Chuck Czajka, a certified Social Security claiming strategist and the CEO of Macro Money Concepts, an advisory firm in Stuart, Florida.

The first step, he says, is to determine how big a financial hole your job loss puts you in. Tote up your monthly expenses and see what funds you have available to cover them, from savings or a spouse’s work, then look for ways to make up the difference.

Your first line of defense is unemployment benefits, for which you typically qualify if you are laid off, and a severance package, if you got one. If you have an emergency fund, add it to the mix — this is what it’s there for. Run the numbers to see if these financial safety nets can cover your bills and for how long.

If you’re still short, consider these stopgap or short-term measures:

Tap retirement savings. By the time you’re eligible for Social Security retirement benefits, you’re no longer subject to the 10 percent penalty the IRS typically charges for early retirement-plan withdrawals, which expires at age 59½. (The money is still subject to regular income taxes.)

And though it may sound counterintuitive, tapping a 401(k) to delay taking Social Security can be a sound long-term strategy, says Ritter. With the larger benefit — up to 77 percent more, if you claim at 70 rather than at 62 — you’ll need to pull less money from your retirement account to meet your expenses.

Borrow against your home. The average homeowner with a mortgage had about $295,000 in home equity (the difference between what the house is worth and the remaining loan balance) at the end of 2025, according to property analytics firm Cotality. That can provide a valuable safety net in the form of a home equity line of credit, or HELOC.

The average HELOC interest rate was 7.18 percent as of March 11, according to Bankrate, compared to about 20 percent for the average credit card. “If laid-off homeowners have the ability to do a very low rate on a HELOC, that’s an area I think they should look at,” Allen says.

Start a gig job or side hustle. Going the gig route while trying to get back on your professional feet is not uncommon. Roughly 15 percent of people who are counted as unemployed or not in the labor force do some gig work, according to a November 2025 Goldman Sachs analysis of Federal Reserve research. Seeking freelance or consulting work in your field is another way to tide yourself over.

Trim your spending. When you lose your paycheck, you’ll likely need to reduce what Czajka calls “play checks” — money you spend on nonessentials. “That’s all going to change if you don’t have a job,” he says. Take a close look at your budget and focus on covering necessities such as food, utilities, and rent or mortgage payments. Cut back on discretionary spending, such as eating out or shopping for new clothes.

When Social Security is your only lifeline

What if you’re a solo ager with scant savings, or you’ve already tightened your belt as far as it will go? Not everyone has the financial cushion to ignore a readily available income source.

“If taking Social Security early is your only option, you have to take it,” says Len Hayduchok, founder and CEO of Dedicated Financial Services, an advisory firm with offices in New Jersey and Delaware. “We have to survive now. Future planning doesn’t feed your stomach.”

Just know the tradeoffs before you take the leap. The biggest plus, of course, is an immediate and regular infusion of cash to help fill the income gap. The flip side is lower monthly payments for life. The average retirement benefit for people ages 62 to 64 who claimed in 2024 was $1,279 a month, according to the most recent figures available from the Social Security Administration (SSA); for those ages 65 to 69, it was $1,966.

Also, if you claim Social Security and then get another job, you might be subject to the SSA’s retirement earnings test, which can temporarily reduce or even eliminate your monthly payment if your work income exceeds a certain threshold.

In 2026, most beneficiaries under full retirement age lose $1 of Social Security for every $2 that their annual work income exceeds $24,480. Suppose your Social Security payment is $1,300 a month and your new job pays $50,000 a year. Of your $15,600 in Social Security for the year, you would lose $12,760 — half the difference between your work income and the earnings cap.

The good news is that the reduction isn’t permanent. It goes away at full retirement age, even if you keep working, and the SSA adjusts your benefit so that, over time, you recoup what you lost to the earnings test.

Social Security also provides an escape clause of sorts for people who claim benefits early and come to regret it (because, say, they got a new job). At any time during your first 12 months receiving retirement benefits, you can apply to Social Security to withdraw your application. In this case, the SSA essentially treats your initial claim as if it never happened, so you can refile later and secure that larger monthly payment. “It wipes the slate clean,” Shedden says.

The catch, and it’s a big one, is that you must repay every dollar you received from Social Security before the withdrawal (as well as any family benefits your spouse or children collected on your work record).

So, if cash flow is still tight, withdrawal might be a stretch, but it could be a more realistic plan if your new job pays well enough that you can absorb that repayment.

Another option, if you intend to keep working into at least your late 60s, is to suspend your benefits. The SSA allows this once you’ve reached full retirement age; you don’t have to pay anything back, and during the suspension, you’ll get a benefit bump for each month you wait to restart, up to age 70.

“Those rules provide a little bit of a safety hatch,” Allen says.

The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.