Key Points
Claiming before or after your full retirement age will reduce or increase benefits, respectively.
Most people can maximize lifetime benefits by delaying benefits.
Social Security claiming decisions should take into account financial and health situations.
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Deciding when to claim Social Security comes down to what kind of trade-off you want to make. You can take smaller payments over a longer period or larger payments over a shorter period. The implications are different for each choice, but there's no clear choice that works for everyone.
Unfortunately, this is one of the more important decisions you'll make as you're approaching or in retirement, so you want to be confident in your choice. On the bright side, data shows that there's a clear answer on what's better between claiming benefits as early or as late as possible.
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How your claiming age affects your benefits
Claiming benefits before your full retirement age will decrease them by 5/9 of 1% monthly, up to 36 months. Every month after that, benefits will be reduced by 5/12 of 1%. Assuming your full retirement age is 67, claiming benefits at 62 (the earliest age) will result in a 30% reduction in your benefits.
If you delay benefits past your full retirement age, you'll receive delayed retirement credits, which will increase your benefits by 2/3 of 1% monthly (8% annually) until you reach age 70. With a full retirement age of 67, delaying until 70 would increase your benefits by 24%.
Should you claim early or wait?
The National Bureau of Economic Research published a paper in 2022 showing that delaying benefits was the better choice. According to the research, more than 90% of people should wait until the latest age to claim benefits, but only 10.1% appear to do so.
The paper says that by claiming benefits early, Americans are leaving lifetime benefits on the table. To see how, consider Social Security break-even ages, which are the ages at which the total benefits from claiming at two different ages equal out.
The break-even age for claiming between 62 and 70 is around 80.4. Before that age, you would've received more lifetime benefits by claiming at 62. After that age, you would receive more lifetime benefits by claiming at 70. Social Security's average life expectancy at 62 is 81.61 for men and 84.5 for women. This means, on average, someone would have received more benefits by waiting until 70 versus claiming at 62.
Always consider your personal situation
Just because the data says 70 is the best claiming age, that doesn't mean it's the best claiming age for you. If you need Social Security for a good portion of your retirement income, claim it as soon as you need to ensure your expenses are covered. If personal or family health issues are a concern, claim as soon as you see fit.
However, if you can reasonably survive without Social Security, consider delaying to give yourself a better chance at maximizing your lifetime benefits.
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