Retirees should tackle debt before claiming Social Security benefits

The wrong debt can erase the value of waiting to claim Social Security. For people born in 1960 or later, full retirement age is 67, claiming as early as 62 can cut monthly benefits by as much as 30 percent, and waiting until 70 can lift the monthly check. That makes the retirement decision less about theory and more about whether your budget can survive a smaller or larger stream of income.

Why debt and claiming age belong in the same conversation

The Consumer Financial Protection Bureau says claiming age should be weighed alongside debt, income and assets, and that is the right frame. A larger benefit at 67 or 70 only helps if monthly obligations are under control; otherwise, debt service can consume the extra income just as quickly as it arrives. The Federal Reserve Board’s most recent broad household debt snapshot is its 2022 Survey of Consumer Finances, a reminder that balances and repayment pressure are still part of the retirement landscape.

AARP’s March 2025 survey shows how common that pressure has become among older adults. Among older adults with credit card debt, 37 percent said they were carrying more debt than a year earlier, 48 percent owed $5,000 or more month to month, and 28 percent owed at least $10,000. AARP also found that 65 percent of people 65 and older who have debt call it a problem, including 29 percent who call it a major problem. In other words, this is not a side issue. It is a monthly cash-flow issue that can shape when retirement income should start.

Start with defaulted student loans, because they can reach your benefit

If federal student loans are in default, they deserve the fastest attention because they can directly collide with Social Security income. The CFPB says federal student loans enter default after 270 days of missed payments, and it estimated that 452,000 borrowers age 62 and older with defaulted federal student loans are likely receiving Social Security benefits. That matters because collections can reach the retirement check itself, turning an unpaid debt into a potential hit to monthly income.

There is an important distinction here. The CFPB says debt collectors generally cannot take Social Security or VA benefits without first suing, winning a judgment and obtaining a court order. But defaulted federal student loans are a special case, and direct deposit can help protect federal benefits from being frozen or garnished in a bank account. If a retirement budget is already tight, the possibility of benefit interception makes student loan default a higher priority than almost anything else on the balance sheet.

Credit card balances are the fastest way to lose breathing room

After student loan default, credit card debt is usually the next most damaging burden because it is expensive, revolving and relentless. Every month that a balance sits unpaid, interest compounds and the minimum due eats into a retiree’s fixed income. AARP found that 87 percent of older adults surveyed said unexpected expenses contribute to their credit card debt, which helps explain why balances persist even late in life: medical bills, home repairs and car costs do not wait for a convenient month.

The size of those balances matters because Social Security gives you a fixed paycheck, not a flexible one. AARP reported that nearly half of older adults carrying a revolving balance owed $5,000 or more, and 28 percent owed $10,000 or more. Nationwide’s retirement research adds another warning sign: 25 percent of retired investors were still paying down credit card debt, a burden that can quietly absorb the very benefit increase you might be hoping to capture by delaying claiming.

A mortgage is not always bad debt, but it can still dominate the budget

Mortgage debt is different from credit cards and student loans, but it still belongs in the triage conversation because housing is usually the largest fixed line item in retirement. Nationwide found that 26 percent of retired investors were still paying off a mortgage, which means a sizable share of retirees are trying to fund shelter costs from a monthly benefit stream that may be smaller than they expected. Even if the rate is manageable, the payment itself can crowd out medical, food and transportation spending.

That is why the key question is not whether a mortgage exists, but how much of the future Social Security check it will consume. If the payment is modest and the retirement budget has room, a mortgage may be tolerable. If it is large enough that claiming early becomes the only way to cover housing, then the debt is already dictating the claiming decision, and that is a warning sign that should be addressed before filing.

The practical order of attack before you choose a claiming age

The cleanest way to think about retirement triage is to protect the monthly benefit first, then decide when to start it. That means making at least minimum payments on all debt on time, because falling behind anywhere can trigger late fees, collection pressure and added strain. Fidelity’s guidance also gives a useful threshold: if a debt carries an interest rate of 6 percent or more, paying it down before investing additional dollars toward retirement is generally a sound rule, as long as other priorities are covered.

A workable sequence looks like this:

• Clear defaulted federal student loan problems first, because they can threaten Social Security income directly. • Attack credit card balances next, especially if they are month-to-month revolving debts with high interest. • Evaluate the mortgage against the size of the expected benefit, because a large housing payment can make even a delayed claim feel inadequate.

The point is not to eliminate every liability before retirement. It is to keep recurring debt payments from overwhelming the monthly check you choose to depend on. Claiming age can improve or weaken cash flow, but the best outcome comes when debt is already low enough that Social Security can do its job: cover living costs instead of propping up avoidable borrowing.