Answer These 4 Questions Before Claiming Social Security

Are you thinking about claiming your Social Security benefit? Before you do, be certain you're ready.

If you file at the wrong time, your benefit could be much lower than it should be, and you could put your spouse's financial security at risk. And claiming at the wrong time can be difficult (or sometimes even impossible) to undo.

To avoid claiming your benefit, then regretting it later, answer these four key questions before you file. 

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1. What is your full retirement age?

Under the law, every retiree has a designated full retirement age (FRA). This is the age when you receive your standard benefit. If you start before it, you'll see smaller monthly checks, while your check size will grow if you wait until after it.

Your full retirement age depends on your birth year, as this table shows.

Source: Social Security Administration.

If you're thinking of claiming now, this table will tell you if you'll be considered an early or late filer or if you're filing right at full retirement age.

2. What is your primary insurance amount?

Your primary insurance amount (PIA) is the standard benefit you'll receive if you start getting checks right at FRA. It's determined based on your average inflation-adjusted wages over the 35 years in your career when your earnings were the highest. Specifically, your benefit equals a specific percentage of your Average Indexed Monthly Earnings (AIME), with the percentage declining as your income climbs.

You can find your PIA by logging into your Social Security account. This benefit is estimated under the assumption your earnings will remain steady until retirement, so it is most accurate when you're close to the end of your working life. 

You need to know your PIA so you can see what your benefit is likely to be. It's also important to understand how it's calculated so you can decide if you want to keep working. If you've worked fewer than 35 years, it'll be lower because some years of $0 are factored into determining your average wage. Those who are at their earnings peak could also see benefits reduced if they quit rather than working a bit longer in order to replace lower-earning years in the average wage calculation. 

3. How will the age at which you claim your benefit affect the income you receive?

Claiming Social Security prior to full retirement age results in a small cut to your primary benefit amount for each month you're early. Specifically, your benefit is reduced by 5/9 of 1% per month for each of the first 36 months you start benefits ahead of FRA, and 5/12 of 1% for each month before that.

The total reduction is about 6.7% for each of the first three years and 5% per year for each additional year you retire before FRA. So retiring at 65 with a full retirement age of 66 would mean a 6.7% benefit cut, while leaving work at 62 with an FRA of 66 would result in a 25% reduction in the size of your checks. 

If you delay claiming, on the other hand, you'll see a 2/3 of 1% increase for each month you wait until the age of 70. This adds up to an 8% bump for each year you wait. 

If your goal is to maximize your monthly income, waiting as long as possible is the best option. But if you think you'll pass away early, you may want to claim ASAP since you may not live long enough for the extra money in your monthly checks to make up for the years of missed benefits.

4. How will your decision affect your spouse? 

If you were the higher earner, your spouse may want to get a benefit based on your work history rather than his or her own. Your spouse can do that only after you've filed.

Unfortunately, filing ahead of your full retirement age can reduce survivors benefits your spouse would receive if you pass away first. If you're concerned about your spouse having enough money after being widowed, you may want to delay filing for Social Security so you can maximize survivors benefits.

You owe it to yourself not to start your benefits without knowing how Social Security works

Although Social Security is an important source of retirement funds for millions of Americans, it's very common for people not to know how it works or what will affect the size of their benefit checks.

Now that you know the answers to these four key questions, you can decide if waiting is the best course of action, or if filing right now really is the right choice.