Think Delaying Social Security Is Risky? The Truth About Timing Your Benefits.

You want to sign up for Social Security at the right time so you get the most money possible, but it's not always easy to figure out when that is. Many people caution against waiting too long to claim Social Security. If you die before you sign up, you might not get anything back from the program.

But there are risks to claiming benefits early, too. It's worth understanding the trade-offs of each approach and how the government calculates your benefits before you decide which claiming age is right for you.

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How the government calculates your Social Security benefits

The Social Security Administration starts your benefit calculation by looking at your average monthly earnings over your 35 highest-earning years, adjusted for inflation. This is known as your average indexed monthly earnings (AIME).

Then, the government plugs your AIME into the Social Security benefit formula in place in the year you turned 60, regardless of your age at application. The result from this step is your primary insurance amount (PIA). That's the benefit you qualify for if you wait until your full retirement age (FRA) to sign up.

Your FRA depends on your birth year, but for most, it's 67. However, many don't sign up right at their FRAs. For these individuals, the Social Security Administration makes one final adjustment, either reducing or increasing their benefit based on their age at the time.

Claiming early reduces your PIA by 5/9 of 1% per month (6.67% per year) for up to 36 months, and then by 5/12 of 1% per month (5% per year) thereafter. Those who apply as soon as they become eligible at 62 get 70% of their PIA per check if their FRA is 67. This is a significant reduction, and it's generally permanent.

Waiting to apply increases your benefits, and this continues past your FRA. After this point, your benefits grow by 2/3 of 1% per month (8% per year) until you qualify for your largest checks at 70. You'd qualify for 124% of your PIA per check at this age if your FRA is 67.

What to consider when timing your Social Security benefit claim

There are clear advantages to delaying your Social Security claim, even if you don't make it all the way until 70 before applying. But the right time for you to sign up depends on several factors, including your life expectancy, your finances, and when your spouse plans to apply for Social Security, if you're married.

Sometimes, a lack of other retirement income leaves seniors with no choice but to apply for Social Security early. The regular monthly checks are necessary to cover their monthly bills, and delaying their application could cause them to go into debt. In that case, applying early is often the right move, even if it leads to a smaller lifetime benefit.

A short life expectancy can also spur some people to apply for Social Security early so they can get as many checks as possible while they're alive. However, those with a spouse and dependents may choose not to apply for Social Security at all in this situation to increase the survivor benefits their family members are eligible for after they're gone.

Early claiming can also make sense if you are the lower-earning spouse and you want to help your partner delay their retirement benefits until they qualify for larger checks. You can start your retirement benefits early, then switch to a spousal benefit if that's worth more once your partner applies.

If none of these things apply to you, delaying Social Security might be a better option. You could wind up with a larger lifetime benefit this way, which may help you stretch your personal savings a bit further.

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