The Social Security Administration considers the "full retirement age" to be 66. However, you can actually claim your benefits as early as age 62 or as late as age 70.
People delay claiming benefits because their monthly checks get bigger for every year they wait. While that can sometimes make waiting a smart idea, here are three instances in which waiting is not the best option:
1. You're worried that your benefits will get cut if you continue to work
Many people choose to stay in the work force into their late 60s and beyond. Those who do might mistakenly believe that if they claim benefits while they are still working, they'll be forced to take a reduced benefit. As a result, they might think the smart move is to wait until age 70 to minimize the hit.
While it is true that a person's benefits will be cut if they claim while they are working, this only applies to workers who claim prior to their full retirement age. Thus, if you start taking benefits the moment you reach your full retirement age -- which currently ranges from 66 to 67 based on birth year -- your benefits won't be reduced at all.
2. You're in poor health but want the biggest paycheck possible
While it is true that monthly Social Security checks grow by about 8% for every year that you wait, some people forget to factor in that they'll miss out on years of payments if they delay taking benefits.
As a quick example, assume that your monthly benefit is $1,000 at full retirement age. If you file at age 62 you'll only get $750 per month. Meanwhile, if you wait until age 70 the payout will be $1,320 per month. That $570 monthly difference might sound like a compelling reason to wait. However, you also have to factor in that you could have received $750 a month for eight years if you choose to take benefits as early as possible. That's a total of $72,000 in payments, which means that it would take more than a decade of waiting just to break even.
If you are in excellent health and longevity runs in your family, perhaps waiting is the right move to make. However, if you have a serious health condition that is likely to get worse, waiting isn't likely to pay off.
3. Your trying to take advantage of a former loophole
For decades many couples took advantage of a strategy called "file-and-suspend" in order to maximize their benefits. This plan calls for the spouse with the higher benefits to file for Social Security at full retirement age so the other spouse could start collecting the maximum spousal benefit immediately. From there, the breadwinning spouse would suspend his or her benefits, allowing them to continue to grow. At age 70, the benefits would be turned back on, thereby maximizing the couple's total payout.
While this was a great strategy to consider, it is no longer a viable option. The reason is that law makers changed the rules so that when a primary worker suspends his or her benefits, all other benefits based on that worker's earnings history stop too.
If you are planning on delaying your benefits until age 70 to simply try and take advantage of this loophole, you're barking up the wrong tree.
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