Why the Age When You Claim Social Security Matters So Much

Key Points

• Most people will claim Social Security between the ages of 62 and 70.

• Your benefit will increase the longer you wait to claim

• Making an informed choice about the timing of your claim can help you maximize the Social Security you collect in your lifetime.

• The $23,760 Social Security bonus most retirees completely overlook ›

Social Security benefits become available to you when you turn 62. However, you do not have to claim them at that time. In fact, benefits are commonly claimed anywhere between the ages of 62 and 70.

That's a pretty wide range, and it's really important that you make an informed choice because your Social Security claiming age can matter a lot more than you think.

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Here's why your Social Security claiming age matters

The age when you claim Social Security directly affects your monthly benefit, and in turn, the lifetime income you'll collect from the program.

Every worker is assigned a full retirement age (FRA) for Social Security, based on their birth year, and this is the age someone qualifies for their primary insurance amount (PIA), or baseline benefit. For anyone born in or after 1960, their FRA is 67. When you claim benefits before FRA, early filing penalties result. If you claim after FRA, delayed retirement credits can be earned until the age of 70.

Early filing penalties reduce benefits by 5/9 of 1% up to the first 36 months that benefits are claimed before FRA. Anyone who claims more than 36 months early will see their benefits reduced by 5/12 of 1% per additional month. On the other hand, delayed retirement credits increase your benefit consistently by 2/3 of 1% each month.

Here's an overview of how this ends up affecting your benefits:

• You'll lose 6.7% of your PIA for each of the first three years of your early claim.
• You'll lose 5% of your PIA for the years before that.
• You end up losing 30% of your PIA in total if you claim at 62 instead of 67.
• You'll gain 8% per year on top of your PIA by delaying (credits max out at age 70).
• You could end up increasing your benefit to 124% of your PIA if you delay until 70.

These increases and decreases are significant. For example, if you are on track for $2,000 as your primary insurance amount but reduce that amount by 30% to collect benefits as early as possible, you're left with just $1,400 per month. If you increase that $2,000 by 24% by waiting until 70, you'll be rewarded with $2,480 per month. The difference between the two monthly benefit amounts at 62 and 70 is over $1,000.

Since Social Security benefits are protected against inflation and paid out for the rest of your life, there are major consequences from substantially reducing (or increasing) these benefits. That's why you must consider the impact of your claiming age when retirement planning.

Here's what else you need to consider before claiming Social Security benefits

While an early claim reduces your benefit, it does also mean you get more checks over your lifetime. And you could potentially open up the door to early retirement by claiming Social Security early if you'd otherwise have to stay in the workforce longer.

On the flip side, a delayed claim means you'll either have to delay your retirement or rely solely on your 401(k) or other retirement savings to support you until claiming. This could force you to put off early retirement if the money in your personal savings isn't enough. Meanwhile, you will also miss out on years of income upfront. As a result, you must live into your 80's to receive the bigger benefit long enough to actually offset the missed income and come out ahead.

Yet another consideration is how your Social Security claim may affect your spouse if they want to claim spousal benefits based on your work history. They cannot collect spousal benefits until the primary earner has filed for retired worker benefits. And the primary earner's claim also affects survivor benefits.

Ultimately, you'll need to consider your retirement goals, the amount of money you have in retirement plans, your personal health, and the needs of your family when you make your decision. By thinking carefully about all these factors, you can make the choice that is right for you.

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