Deciding when to take Social Security retirement benefits is one of the biggest retirement choices you will make, especially if Social Security will make up a decent chunk of your retirement income. Unfortunately, the choice isn't always straightforward, but there are ways to work through your decision.

If you're thinking about delaying your benefits until you reach age 70, here's why that might not be the best choice.

Two people hugging in the front of a sailboat.

Image source: Getty Images.

The effects of taking benefits early or late

One of the most important things you should know regarding your Social Security benefits is your full retirement age (FRA), which is the age you're eligible to receive your full monthly benefit. Your FRA is based on your birth year:

1943 to 1954 66
1955 66 and two months
1956 66 and four months
1957 66 and six months
1958 66 and eight months
1959 66 and 10 months
1960 or after 67

Data source: Social Security Administration.

Regardless of your FRA, you have the option to begin receiving benefits as early as age 62, but doing so will reduce your monthly benefit based on how far away from your FRA you are. If you're within 36 months of your FRA, benefits are reduced by five-ninths of 1% each month. For each month earlier than 36, benefits are reduced by five-twelfths of 1% monthly.

For example, if your FRA is 67 and you take benefits at 62, your monthly benefit will be reduced by 30%.

Conversely, you have the option to delay your benefits until age 70, increasing your monthly payout each month past your FRA. How much your benefit increases depends on your birth year.

1933-1934 5.5% 11/24 of 1%
1935-1936 6% 1/2 of 1%
1937-1938 6.5% 13/24 of 1%
1939-1940 7% 7/12 of 1%
1941-1942 7.5% 5/8 of 1%
1943 or later 8% 2/3 of 1%

Data source: Social Security Administration.

Is delaying benefits worth it?

Many people consider delaying their Social Security benefits because of the increased monthly payout, but is it truly worth it? The increased monthly checks may seem enticing, but it can be slightly misleading when you fully consider how many checks you'll miss out on until that point. That's why getting a gist of your breakeven point is always important.

Your breakeven point is the age at which your total amount received from claiming early equals the total amount received by waiting until 70.

Let's imagine these are someone's expected monthly payouts based on the age they begin receiving benefits:

  • 67: $2,000
  • 70: $2,480

Below is the amount they would've received by different ages:

67 $2,000 $312,000 $372,000 $432,000
70 $2,480 $297,600 $372,000 $446,400

Data source: Author calculations.

Using this example, this person's breakeven age would be 82 1/2. If they continue receiving benefits past age 82 1/2, their overall amount received begins to be greater than if had they received benefits early or at their FRA.

Some factors you should consider

Whether you should delay your benefits until 70 depends on many factors. Some of the most important are finances, health, and family situation. If Social Security will be a large portion of your retirement finances, delaying it until 70 may not be an option. You may need the additional income source as soon as possible for your livelihood, and that's perfectly fine.

You also need to consider your health and family health history. If your health isn't the best or your family has a history of life expectancies younger than your breakeven point (the average U.S. life expectancy is 76.1 years old), it may be in your best interest to take benefits before 70 to maximize your total payout.

Delaying your benefits until 70 may make sense financially if you live into your mid-80s or longer, but that's unfortunately not something you'll know for sure when making your decision. Retirement is a time to reap the rewards of decades of working -- don't shortchange yourself by missing out on valuable years of Social Security payments.