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If you're debating the pros and cons of claiming Social Security early or late, you're not alone. Deciding when to begin receiving your Social Security benefits is one of the most important (and difficult) decisions facing retirees. Is it smarter to wait to claim so that you can get a bigger monthly check? Maybe not. Here's why delaying when you claim Social Security until 70 may not be the smartest money-move you can make in retirement.

Your claiming options

If you've accumulated enough worker credits to qualify for Social Security (it usually takes about 10 years), then you need to know how Social Security calculates your benefit and when you can begin receiving them.

Social Security determines how much you'll get in Social Security by using a formula that's based on your highest 35 years of earnings. If you work for fewer than 35 years, then your benefit is based on however many years you did work. If you work over 35 years, then your 35 highest income-earning years are used in the calculation.

You can claim your Social Security at any point between 62 and 70, however, you'll only receive 100% of your calculated monthly benefit if you claim at your full retirement age, or FRA. FRA is currently age 66, but it increases steadily to age 67 for those born after 1960. 

Full retirement ages vary depending on birth year. Data source: Social Security Administration.

The monthly benefit that Social Security pays you if you claim before you reach FRA is reduced, however, the amount you receive is increased if you claim after your FRA. For example, if your FRA is 66 and you claim at 62, then you'll receive 75% of the benefit you would otherwise have received at 66. However, if you claim at age 70, then you'd receive 132% of your FRA benefit amount. 

Data source: Social Security Administration.

Digging into the details

On the surface, a bigger monthly payment may make it tempting to delay taking Social Security as long as possible. After all, doing so can result in a payment at 70 that's 76% bigger than the amount you'd receive if you claim at age 62. 

However, many retirees may benefit from focusing less on the size of their monthly haul and more on the amount of money they can get from Social Security over their lifetime. For example, claiming at 62 gives you 8 years of payments that you wouldn't get if you waited until 70. At $750 per month, that works out to an extra $72,000 in your pocket.

Taking this thinking one step further, it can be helpful to calculate your break even point, or the age at which the amount you would collect from larger payments from delaying eclipses the amount you'd have collected by claiming early. 

For instance, if your FRA is 66 and you wait to claim Social Security until age 70, then the break even point with claiming at age 62 is age 80. 

Although many of us can expect to live to age 80, a lot of people won't live that long. According to data from the Social Security Administration, a man and woman who are 60 years old today have a 57.7% and a 68% chance of seeing 80, respectively. 

Obviously, it's critical to carefully consider your family health history and your own health situation before deciding when to claim your benefits. That's especially true if you're fortunate enough to have other retirement income, such as a pension, that allows you to invest your Social Security income, rather than spend it.

Because of the time value of money, investing your Social Security income can push the break even point that's associated with claiming Social Security at 70 into your 90s.

For example, let's assume Sandy can receive $750 per month in Social Security if she claims at 62, $1,000 per month if she claims at 66, and $1,320 if she claims at 70. If Sandy claims Social Security at age 62 and stashes her $750 per month into an investment returning a hypothetical 6% annually for 20 years, then Sandy could end up with $331,000 tucked away in her portfolio at age 82. Alternatively, if Sandy waits until 70 to claim and then invests her $1,320 per month in that same investment, her portfolio would be worth only $267,000 at age 82.

If Sandy lives until 92, her claim-early portfolio could grow to $711,529 while her wait-until-70 portfolio could grow to $687,337. Crunching the numbers, Sandy's wait-to-claim-at-70 portfolio wouldn't grow to be bigger than her claim-early portfolio until she reaches 97.

Planning ahead

If you continue working, then claiming early might not make as much sense because earnings over specific limits result in the Social Security Administration reducing your Social Security payment. Also, up to 85% of your Social Security can end up being taxed if your income is above specific thresholds. In both scenarios, your break even point could change significantly depending on your situation.

You should remember that small changes in your expected returns can alter break even points too. For instance, if your average returns on a claim-early portfolio are low in the years between 62 and 70 and then they're high in the years after age 70, then the break even point for waiting to claim occurs sooner.

Because variables like these can shift break even points, it can pay to calculate different scenarios before making a final decision on when to claim. Overall, calculating break even points can be useful for helping you make your claiming decision, but they shouldn't be the sole factor in determining when to claim your Social Security. Ultimately, the smartest move is to consider all the Social Security strategies available to you before making your decision.