Quality of retirement -- now and in later years -- is a big factor in deciding when to file Social Security.
Social Security will provide a key portion of the retirement income of the vast majority of Americans. It also will pay a significantly higher monthly benefit to retirees who delay when they start taking their benefits. How much does waiting boost your Social Security checks? Well, there are a few things that affect that, starting with when you plan to retire, and when you're considered to be at full retirement age by the Social Security Administration.
What's your Full Retirement Age?
While the actual dollar amount you will be eligible to receive each month depends on a number of factors, including how long you worked and how much you earned, you also need to know your full retirement age, at which you'll be eligible to receive what the government designates as 100% of your monthly benefit.
Your full retirement age depends on when you were born. For people retiring in 2016, it's 66. If you aren't turning 66 this year, here's a table to help you determine when you'll be at full retirement age:
| Year of Birth * | Full Retirement Age |
|---|---|
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 65 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943--1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
| *If you were born on Jan. 1 of any year you should refer to the previous year. (If you were born on the first of the month, your benefit (and your full retirement age) is calculated as if your birthday was in the previous month.) | |
Source: Social Security Administration.
As you can see, the full retirement Age is slowly rising from a low of 65 to a high of 67. However, regardless of where you fall on this chart, you're eligible to start getting a reduced monthly retirement benefit as early as age 62.
How claiming early cuts your check
Here's a quick look at what you'd get if you claim early, assuming your Full Retirement Age is 66:
| Age | Retirement benefit | Spousal benefit |
| 62 | 75% | 35% |
| 63 | 80% | 37.5% |
| 64 | 86.7% | 41.7% |
| 65 | 93.3% | 45.8% |
Source: Social Security Administration.
It's important to note that it's not only your benefit that would be reduced, but also that of your spouse, if your spouse will be filing on your work record versus their own.
How waiting longer to claim boosts your check
Each year you delay claiming your benefit beyond full retirement age (up to age 70) will boost your check by 8%. Here's how that looks for the 66-and-above crowd:
| Age | Percentage of benefit |
| 67 | 108% |
| 68 | 116% |
| 69 | 124% |
| 70 | 132% |
Source: Social Security Administration.
There's a little more to it, however. Since the increase you get will actually be calculated based on how many months you've delayed retirement, each month you delay retirement would be worth a 2/3 of 1% boost to your check, capped at 32% total once you reach age 70.
However, that boost doesn't apply to spousal benefits, which are capped at no more than 50% of your benefit at Full Retirement Age.
One further factor to consider: Because your benefit is calculated based on your inflation-adjusted income from your 30 highest-earning years, it's probable that each additional year you work at the end of your career will be adding a high-income year to that calculation, displacing a lower-income one from decades earlier. This, too, will increase this size of your monthly check.
Should you delay your benefit? It depends
Social Security is structured the way it is so that people have some flexibility in choosing when to file. But at the same time, it's also structured so that, on average, it will pay out about the same number of dollars to you regardless of when you file -- if you have an average life expectancy.
For this reason, unless you have a medical condition that prevents you from continuing to work, or a medical or family history that indicates you're likely to die younger than the average, most people would be better off delaying payment as long as they can.
By delaying your benefit, you'll have more income in old age, when you're far more likely to need financial resources to pay for basic caregiving that medical insurance and Medicare won't cover. That additional income could turn out to be far more important than you ever imagined.
You'll have to balance whether you can afford to file early against the value of your other assets and income. But it's not just about the numbers. It's also about the quality of your retirement in the early years of retirement as well as later on. Bottom line: If you're still years away from retirement, how much you save and invest for retirement -- now -- will improve your ability to retire earlier.
