As you get older, you have a lot of choices to make that will shape your retirement. One of the most important is when to start getting your Social Security checks. These benefits can be a key source of income and, while you can start getting money as soon as 62, you'll get a lot more if you wait longer. 

Delaying the start of your benefits until full retirement age -- between 66 and 67 -- will enable you to avoid losing some of your benefits to early filing penalties. But if you really want to max out your income, you'd actually have to wait until age 70 to get delayed retirement credits.

There's a cost to this delay, though. You go years without checks coming in. And this can be especially painful during a recession, which the country has officially entered. So before you decide waiting is right for you, you need to ask yourself this key question. 

Older woman sitting on couch looking at check.

Image source: Getty Images.

When is your break-even point?

Your break-even point is the point at which you've made up for all the Social Security checks that didn't come your way if you delayed your claim for benefits.

While your benefits can start as early as 62, early filing penalties cost you five-ninths of 1% per month for each of the first 36 months you've claimed ahead of your full retirement age. If you leave work more than 36 months early, each prior month comes with a penalty equaling five-twelfths of 1%. On the flip side, if you wait until after your full retirement age, delayed retirement credits increase your benefit by two-thirds of 1% for every month up until age 70. 

To figure out your break-even point:

  • Figure out how much your benefits would be at each age you're thinking about claiming: Do this by multiplying your standard benefit by the increase or decrease due to early filing penalties or delayed retirement credits. (To make this easier, check out these charts showing what percentage you'd lose due to filing early and how much you gain by waiting). If your standard monthly benefit at a full retirement age of 66 would be $1,500, you'd be looking at a benefit of $1,200 at 63 after a 20% reduction or a benefit of $1,620 at 67 after an 8% increase. 
  • Calculate the difference between your higher and lower benefits. In this case, it's $420 a month. 
  • See how much income you'd miss out on by waiting.  If you wait from 63 to 67, you'd miss out on four years of $1,200 monthly checks, which adds up to $57,600. 
  • Calculate how long it takes to make up for the missed income. At a rate of $420 extra per month, it would take you 137.14 months, or 11.42 years, to break even for the $57,600 you didn't receive.

If you start benefits at 67 instead of 63, you'd break even after 11.42 years at the age of 78.42. If you live beyond that month, you'd end up with more lifetime income than if you went ahead and took benefits beginning at age 63. But if you don't live to 78 years and roughly five months, you'd end up with less overall benefits paid out. 

Now you can make an informed choice about when to start benefits

By calculating your break-even point, you can decide if you're likely to live long enough that delaying the start of your benefits is a smart financial choice. You can also consider whether getting extra money so late in life is worth forgoing the cash early on when you might enjoy those retirement funds more. 

The right decision will depend on your financial circumstances, health, and other personal factors. But do the calculations before you decide, so you can make a fully informed choice.