How old you are when you file for Social Security will have a major impact on how much income you'll receive from the program. Though the law allows you to claim benefits as young as age 62, there's a cost to that impatience. The government has defined a full retirement age (FRA) for people born in each year, and for every month early you decide to start taking benefits, the Social Security Administration lops a small percentage off the size of your monthly payments. For virtually everyone reading this, your FRA will be 66, 67, or somewhere in between.

For that reason, many people try to keep working until they hit their FRA, which allows them to get the full benefit the program says they're entitled to, based on their earnings history.

But the other side of the early-filing penalty is a late-filing bonus: Delay the time you start collecting benefits past your FRA, and for each month you wait, you accrue credits that boost the size of your monthly payouts to the tune of 8% a year.

Now, many seniors retire well before 70. But what if you're still working at that point in life? Should you file for Social Security benefits anyway, or keep holding off as long as you're collecting those paychecks?

Smiling older man in business suit talking on phone


Don't wait too long to claim your benefits

Some people assume that they won't be allowed to work and collect Social Security at the same time, but that's not true. In fact, once you turn 62, you can file for benefits even if you're still employed. But if claim benefits prior to your FRA, the Social Security Administration will withhold a portion of your benefits if your wage income exceeds a certain threshold known as the earnings test exempt amount.

Once you reach your FRA, however, you can earn as much money from a job as you're able, and still collect your full monthly Social Security benefits. Therefore, filing for benefits at 70 -- even while working -- won't result in any sort of benefit cut.

Furthermore, you absolutely shouldn't postpone claiming your benefits past age 70, regardless of whether you're working at that point or not, because once you turn 70, you can't accrue any further delayed retirement credits. Therefore, if you don't file for Social Security at 70 at the latest, you can lose out permanently on income you're entitled to.

Now, if you turned 70 a few months ago and haven't filed for Social Security yet, don't panic. The SSA will pay you up to six months' worth of benefits retroactively, which means that as long as you file by 70-1/2, you shouldn't lose out on any money. But if you're already past age 70-1/2 and aren't getting your benefit payments, you've already left some money on the table. If that's your situation, file at once -- it's the best you can do.

Get schooled on Social Security

As Mark Twain famously quipped, "What gets us into trouble is not what we don't know. It's what we know for sure that just ain't so."  The rules around Social Security benefits are complicated, and the myths around the program are many. So read up on how the program really works -- before you're going to need it. The more you know, the less likely you are to file at the wrong time or make some other move that inadvertently reduces your retirement income.