Should You Claim Social Security at 66?

The full retirement age for Social Security is currently 66 years old, but the majority of Americans claim Social Security before they reach this age. Here are the reasons to claim Social Security early, the reasons to wait as long as possible, and why it might be a smart idea to claim at your full retirement age.

What's your full retirement age?

If you're in your mid-60s now, your full retirement age is 66. However, that's set to increase very soon.

Image source: Getty Images.

Specifically, full retirement age for Social Security is 66 for Americans born in 1954 or earlier, and 67 for those Americans born in 1960 or later. For people with birth years from 1955 to 1959, the full retirement age is set to gradually increase, according to this chart:

Data source: Social Security Administration.

This is important to the question "Should I claim Social Security at 66" because if your full retirement age is not 66 years old, claiming at 66 will result in a permanent benefit reduction. I'll discuss this in detail shortly.

Here's why you may want to claim Social Security sooner

Americans who qualify for Social Security retirement benefits can choose to start theirs at any time between the ages of 62 and 70. The most popular age to claim benefits? Sixty-two -- as early as possible.

There certainly are some good reasons to claim early. Most obvious is if you need the money for living expenses. A study by Voya Financial showed that 60% of Americans leave the workforce sooner than they had planned, either for health reasons or due to losing their job. So, if you're no longer working and are eligible for Social Security, it can be a smart move to claim early.

Another good reason to claim early is if you're not in great health. Social Security is designed so that the average worker will receive the same lifetime amount of benefits, regardless of the age at which they claim. However, this is based on actuarial life expectancy averages -- not your personal situation. Therefore, it's important to take your own health and family history of longevity into account.

Here's why you might want to wait

The most obvious reason to wait to claim Social Security is for a higher monthly benefit for life. By choosing to wait until after your full retirement age, your benefit will be permanently increased by 8% for every year you wait (0.67% per month) until as late as age 70. So, if your full retirement age is 66, waiting until 68 will result in a benefit that's 16% higher.

On the other hand, claiming early will result in a permanently reduced benefit. Your benefit will be reduced by 6.67% per year, for up to three years early, and 5% per year beyond that, as early as age 62.

So, if you are in good health or are still working with no desire to leave your job, it can be a smart idea to wait to claim Social Security. Your Social Security retirement benefit is an inflation-protected stream of income, so if you can afford to do so, it can boost your quality of life in retirement if you choose to wait beyond your full retirement age.

So, who should claim Social Security at 66?

In a nutshell, claiming at 66 can be a good idea for people who fall between the two situations presented here. For example, if you aren't forced to leave your job early, but don't exactly want to work forever, retiring and claiming benefits at your full retirement age can be a smart middle ground. The same can be said if you're in average health, or if you don't particularly need a higher Social Security benefit but can't afford a big permanent reduction either.

Another situation to keep in mind is if your spouse anticipates getting a spousal benefit based on your work record. You can read more about spousal benefits at the linked article, but the key point for our purposes is that there is no increase in spousal benefits for delayed retirement. Also, your spouse cannot start collecting a spousal benefit until you've claimed your own retirement benefit. So, if your spouse is planning to collect a benefit on your work record, it's rarely a smart move to delay Social Security beyond their full retirement age.

The bottom line is that there's an eight-year window during which you can choose to claim Social Security, and there's no ideal age for everyone. It's important to consider your personal needs and desires and weigh the pros and cons to determine the best claiming age for you.