Of all the variables involved in retirement planning -- life expectancy, inflation, future expenses -- none seems to interest people as much as Social Security. As people struggle to save enough of their own money for retirement, the idea of a guaranteed monthly payment is a comfort. But how much is guaranteed and how far it'll get you depends to some degree on your choices, and that's where a lot of people get tripped up.

About 47% of near-retirees -- those planning to retire in the next 10 to 20 years -- don't know when they should begin claiming Social Security benefits, according to an Empower Institute survey. Making the right call on this is tricky, but it's important to think through the decision carefully, because when you start claiming benefits can significantly affect how much you receive from Social Security over your lifetime. Let's take a closer look.

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How your Social Security benefit is calculated

The Social Security Administration determines your benefit amount by looking at your average indexed monthly earnings (AIME). This is just a fancy way of saying your average monthly earnings over your 35 highest-earning years with adjustments for inflation. If you haven't worked for at least 35 years, your calculation will include zeros for the years you didn't work, and your AIME will be much lower as a result of that. You can figure out your AIME by multiplying your income for each year by the index factor for that year and totaling them up.

To calculate your Social Security benefit if you were to begin claiming in 2020, you would:

  1. Multiply the first $960 of your AIME by 90%.
  2. Multiply any amount greater than $960 but less than $5,785 by 32%.
  3. Multiply any amount greater than $5,785 by 15%. 
  4. Add the three numbers together.

If this sounds complicated, you can save yourself some time by just creating a my Social Security account and logging in. This will tell you your benefit amount if you were to continue earning roughly the same amount every year. It may not be perfect if your income fluctuates, but it can give you a good starting point.

All of these calculations can help you figure out how much you'd get at your full retirement age (FRA), which is 66 or 67, depending on your birth year. You can start benefits as early as 62, but if you do so, you'll only get 70% of your scheduled benefit per check if your FRA is 67, or 75% if your FRA is 66. You also have the option to delay benefits past your FRA, and your checks will continue to increase every month until you reach the maximum benefit at 70, which is 124% of your scheduled benefit per check if your FRA is 67, or 132% if your FRA is 66.

How to choose the right age to start Social Security

As you can see, the age when you begin Social Security can matter a lot. If you begin early, you'll get more checks but less money per check. That could lead to less money overall, but it depends on how long you expect to live. 

Claiming early makes sense if you don't expect to live a very long life. You may as well get as much money from Social Security as you can now, because you might not be around long enough to reap the rewards of larger checks later on. However, if you expect to live a long time, delaying benefits will probably net you more money over your lifetime.

You can't expect to get this exactly right because you can't be sure how long you'll live, but use your best guess. Then, estimate your lifetime benefit if you began at different starting ages. Your Social Security account should show you estimated benefits if you began at 62, your FRA, and 70, so you can start with these. Multiply your estimated monthly checks by 12 to get your estimated annual benefit, and then multiply this by the number of years you expect to receive benefits to see which will give you the most money overall.

For example, if you're entitled to a $1,200 benefit at your FRA of 67, and you think you'll claim benefits for 20 years, you'd multiply $1,200 by 12 to get a $14,400 annual benefit, and then multiply that number by 20 to get a lifetime benefit of $288,000. Do this for all of the different starting ages you're considering, and choose the one that gives you the greatest lifetime benefit (assuming you're trying to get the most money).

Of course, all of this assumes that you can wait to claim Social Security until it's most convenient for you. However, some people don't have enough personal savings to cover their retirement expenses on their own, and they might have to claim benefits early, even if that wouldn't give them the most money overall. 

In this case, you might just have to settle for smaller checks. Alternately, if you have a spouse who's also eligible for Social Security based on his or her work record, the lower-earning spouse could claim benefits early, enabling the higher earner to delay benefits until they can get larger checks. At this point, the SSA will automatically switch the lower-earning spouse to a spousal benefit if this would give him or her more money.

There's no way to know if you're making the best possible choice because you can't be sure how long you'll live, but this information can help you make an educated guess. Crunch the numbers to figure out the best time for you to begin Social Security, and update your retirement plan to account for this.