For most people, Social Security is a lifeline in retirement -- in fact, for 61% of beneficiaries in 2014, Social Security benefits made up at least half of their retirement income.

However, despite depending so much on Social Security, the majority of beneficiaries don't fully understand how it works. The age at which you claim benefits will affect how much you'll receive each month, yet only 23% of workers actually try to maximize their lifetime benefits by planning the age at which they claim Social Security, according to Employee Benefit Research Institute's 2018 Retirement Confidence Survey. Furthermore, only around half of employees have even considered how age affects the amount they'll receive in benefits.

Man sitting at table with dollar bills and coins in front of him

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The age when you start claiming benefits will affect how much you'll receive each month for the rest of your life -- so it's a pretty important decision that shouldn't be made on a whim.

How age affects the size of your Social Security checks

When you're deciding the right time to claim Social Security, the first thing to determine is your full retirement age (FRA) -- or the age at which you receive 100% of the benefits you're entitled to. This age ranges from 65 to 67 depending on the year you were born.

You can start claiming Social Security as early as age 62, but your benefits will be reduced if you claim before you reach your FRA. The amount they'll be reduced depends on your FRA and when you claim, but your checks could be slashed by up to 30%.

Wait until after your FRA, though, and you'll receive delayed-retirement credits that permanently increase your monthly checks. Again, the exact amount you'll receive will depend on your FRA and the age you claim, but by waiting until age 70 to claim, you could receive up to 24% extra on top of your full benefit amount.

This doesn't mean it's always the right decision to claim later. Sometimes it's actually a good decision to claim early. For instance, if you have absolutely need the extra income, then you should claim those benefits rather than struggling to meet ends meet or draining your savings to get by. And if you don't anticipate living long past age 70, then putting off benefits for several years will likely not pay off in the long run -- even if your benefit checks are bigger. It's not fun trying to figure out how to get the most out of Social Security by guesstimating your life expectancy, but it's important if you want to enjoy retirement as much as possible.

Also keep in mind that the total amount you receive in benefits should (at least theoretically) be roughly the same over a lifetime regardless of when you claim. If you claim early, you'll receive more, smaller checks, while delaying benefits will get you fewer, bigger checks.

Social Security in action

One of the best ways to see how age affects your benefits is to look at hypothetical examples. So let's say you were born in 1960, making your FRA 67 years old. Let's also say your full benefit amount is $1,500 per month if you claim at that age.

If you claim at 62, your benefits will be cut by 30%, leaving you with $1,050 each month -- or $12,600 per year. Claim at 67, and you'll receive your full $1,500 per month, amounting to $18,000 per year. Or if you wait until 70, you'll receive a 24% boost on top of your full benefit, bringing your monthly and yearly totals to $1,860 and $22,320, respectively. In other words, you can receive an extra $9,720 per year by delaying benefits by eight years. And over time, that money can add up significantly.

Age Total Benefits When Claiming at 62 Total Benefits When Claiming at 67 Total Benefits When Claiming at 70
62 $12,600 - -
67 $63,000 $18,000 -
70 $100,800 $54,000 $22,320
75 $163,800 $144,000 $111,600
80 $226,800 $234,000 $223,200
85 $289,800 $324,000 $334,800
90 $352,800 $414,000 $446,400

However, sometimes that extra income isn't worth waiting eight years for. In this example, if you waited until age 70 to claim, you'd need to live past age 80 to see your lifetime benefits outweigh what you'd received had you claimed at 62.

Of course, nobody can predict exactly how long they'll live. But if you have reason to believe you won't make it well into your 80s, it may be a good choice to claim earlier and enjoy your retirement while you can. On the other hand, life expectancies are continuing to increase, and it's not uncommon for people to spend several decades in retirement (in fact, 25% of retirees turning 65 today can expect to live past age 90, according to the Social Security Administration).

When it comes down to it, choosing the right age to claim Social Security is a personal decision. But it's something that needs to be considered and taken seriously, because the age you claim will impact your benefits for the rest of your life.

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