When to claim your Social Security benefits can be a baffling question for many people. If you claim it early you collect less, but for a longer period of time. Wait three years after your full retirement age (FRA) and you increase your benefits, which is great if you live long enough for the added money to cover the years you could have been collecting.

FRA varies based upon when you were born. You can determine yours here, but for the purpose of this article, let's be broad and say early retirement is 62, FRA is 66, and the latest you can claim benefits is 69.

A person fills out a Social Security form.

Deciding when to claim Social Security is a challenge for many. Image source: Getty Images.

How does Social Security work?

The Social Security Administration uses your top 35 years of earnings to determine your benefit. If you claim early, however, you lose 6.67% of that amount for each of the first three years, and 5% if there's a fourth. Wait extra years, however, and you get an extra 8% for each year until you hit the mandatory age for claiming benefits (70), meaning you could add 32% to the total.

There are arguments for claiming early and reasons to delay taking benefits. For many people, though, the Three Bears approach is the correct one, and the FRA is "just right."

1. You may die

The average American lives 78.6 years. If you live to that age and claim at FRA (66), you will collect for 12.6 years. If you wait until 70, you will only get 8.6 years of benefits.

With the 2020 average benefit coming in at $1,479 per month, collecting for 12.6 years brings in a cumulative $223,624. If you wait four years and get the 32% bump your monthly check will come out to $1,952, but your cumulative total will end up at $201,475. Yes, if you live longer than the average American, you eventually come out ahead in the calculations, but that's a risk that may not be worth taking.

2. You planned well

While many Americans rely too heavily on Social Security as a source of income in retirement, some plan for it to fill its intended role as part of their retirement income. Social Security should replace around 40% of your pre-retirement income. If you have saved the rest of what you need (and hopefully a bit more than that), then it makes sense to claim Social Security at your FRA.

3. You need it

This may be the most depressing reason, but it's one you have to consider. Many people stop working at or around their FRA because they have to. Maybe they can no longer find a job, or perhaps illness has made it hard for them to work. In these cases, claiming Social Security may be necessary simply to make ends meet.

It's not one size fits all

Claiming at the FRA is the safe choice, but no one option makes sense for everyone. If you get sick at 62 and have to retire, for example, claiming early may make sense. Someone still working at 70 may be better off waiting until they have to claim. There is no single correct answer here, but claiming at your FRA is sort of a hedge against dying, while also providing a potentially long period for being paid the benefit you earned.