When you get older, you get to decide when to claim Social Security retirement benefits. You can start your benefits anytime between ages 62 and 70. There's no requirement that you start collecting benefits once you retire -- it's up to you when to file for them.
Your decision will affect your income, as well as your spouse's income, which is why it's important that you make an informed choice. To do that, you'll want to ask yourself these three key questions before making a decision.
1. How does your birth year affect your benefits?
It may come as a surprise, but the year in which you were born affects when you can and should claim Social Security. If you want your standard benefit (which is based on your career-average wages), you must claim your first check at a specific time. It's called your full retirement age (FRA). For those 66 or younger, here's when yours is, based on your birth year:
- 1956: 66 and 4 months
- 1957: 66 and 6 months
- 1958: 66 and 8 months
- 1959: 66 and 10 months
- 1960 or later: 67
If you decide you prefer to claim retirement benefits at a young age, your standard benefit will shrink by 5/9 of 1% per month for each of the first 36 months you receive a payment before your full retirement age. And if you start payments more than 36 months prior to FRA, each month before that will result in an additional reduction in your standard benefit of 5/12 of 1%.
On the other hand, if you prefer to maximize monthly income, you may want to delay your first payment. For each month you wait to claim benefits until after your full retirement age, you'll see your check increase by 2/3 of 1%. This happens only until age 70, though. At that time, there are no further benefit increases just for waiting to start payments.
2. How is your health
You'll also want to consider your health status in determining when it's the right time to claim Social Security. This can have an impact on whether a late claim or an early one makes the most sense.
If you don't expect to live long because you're in poor health, your best bet may be to file for Social Security as soon as you can. If you wait to claim benefits, you may not end up getting any. Or you may get them for such a short time that the higher payments you'd receive due to waiting won't make up for all the payments you passed up by not claiming ASAP.
You can calculate your break-even point to determine how long it will take you to make up for benefits if you wait to claim. You can do this by figuring out how much total income you'll miss and dividing that number by the amount of extra income you'd get later, once payments start coming. This calculation shows you how many higher checks you'd have to receive to break even or end up with more total money by having waited. If you don't think you'll live long enough to get benefits, waiting could be the wrong move.
3. Will your spouse rely on your help getting benefits?
You also have to take your spouse into account. There are two reasons for that.
First, if you are the higher earner and you start your payments early, you'll shrink the survivor benefits your widow(er) will get. Your surviving spouse can keep the higher of the two checks that either person was getting after your death, so you'll want your payment to be as high as possible if your spouse will need to rely on it.
This is one example of a situation where even if you were in poor health, waiting to claim might pay off. You personally could see less Social Security if you delay, but your spouse could get much bigger survivor benefits after you're gone.
On the other hand, if your partner is going to claim spousal benefits on your work record rather than their own retirement benefits, you must start your payments before that can happen. If your husband or wife is waiting because they didn't earn enough to qualify for Social Security, or if they are receiving benefits but their payments are very low because they didn't earn much, an earlier claim is sometimes the right move.
As you can see, there's a lot to consider in deciding when to claim Social Security. Just be sure you know the answers to these three questions. That knowledge will go a long way toward informing your choice.