Claiming Social Security Early vs. Working Longer: A Side-by-Side

Deciding when to start claiming Social Security is one of the biggest decisions you'll make as you near retirement.

You can start claiming Social Security as early as age 62, or wait until age 70 to increase your benefits. But there are tons of factors to consider -- health, finances, and lifestyle should all play a role in your decision.

Here's a primer on when you should start claiming Social Security.

Reasons to claim Social Security early

Claiming Social Security earlier gives you immediate financial help, which can be perfect if you hope to retire early. It might also make sense if you have health problems or a shorter life expectancy.

Advantages of claiming early include:

• Having immediate income for retirement.
• Potentially reaping more from Social Security if you die early.
• The option to leave your investments untouched while Social Security covers day-to-day expenses.

The main downside of claiming early is that your monthly benefits are permanently reduced -- up to 30% lower than waiting until your full retirement age (FRA). Also, because your base benefit amount is lower, your benefits won't grow as much from cost-of-living adjustments (COLAs).

For example, let's say if you waited until 67 (your FRA) to collect Social Security, you'd get $3,000 a month. If you instead started withdrawing at 62, you'd get 30% less from Social Security every year after that -- $2,100 a month, only upped a bit each year by COLAs.

If you're the higher earner in your household, your spouse's survivor benefits will be smaller, too. And if you keep working while claiming early, your benefits may be reduced by the Social Security earnings limit until you reach FRA.

In short, you should probably have a good reason to claim Social Security early, whether it's financial needs or serious health trouble. Otherwise, staying patient is the way to go.

Reasons to keep working

Delaying Social Security past your FRA increases your benefits by about 8% per year. Using the numbers from the previous example, you could up your benefits by 24% -- from $3,000 to about $3,720 -- by waiting until age 70, three years past your FRA.

Other benefits of delaying Social Security include:

• Higher COLA increases, thanks to your higher base amount
• The option to keep saving in 401(k)s and IRAs if you keep working
• More potential lifetime benefits if you expect to live longer
• Increased survivor benefits for your spouse

Not every person can afford to delay Social Security. But generally speaking, the longer you can wait, the better off you'll be.

If you're still in the workforce and want a great way to save for retirement, I recommend an IRA. In an IRA, your investments are exempt from capital gains and dividend taxes, which can mean long-term savings in the five or six figures.

If you can hold off on Social Security and build up your nest egg with an IRA, that's the way to go.

Want to start maximizing your retirement savings? See our list of the best IRAs available now.

When should you start claiming Social Security?

There's no perfect time to claim Social Security -- but there are some general guidelines to keep in mind.

Consider claiming Social Security early if:

• You need cash flow immediately.
• You have health concerns or a shorter life expectancy.
• You have enough savings to invest or cover other expenses.

Consider working longer if:

• You can continue working and want higher monthly payments.
• You're aiming to maximize lifetime and survivor benefits.
• You want to take advantage of high late-career earnings.

Social Security is just one piece of the puzzle. The more you align it with your savings, investments, and lifestyle goals, the more freedom you'll have to retire on your own terms.