Social Security is a complex program with many rules governing how much people can claim in benefits.
People work their entire lives to earn benefits, which can be a key supplement to their savings in retirement, so it's important to understand at least the basics of how the program works so they can claim as much as possible.
Here's the most important Social Security table you'll ever see.
Age matters
A key part of the program that can impact benefits is deciding when to claim them. Retirees can do so as soon as age 62, but they might want to wait until as late as 70.
The total benefit you're entitled to at what's called full retirement age (FRA), which is 67 for those born after 1960, is called your primary insurance amount (PIA). Retirees get penalized for claiming benefits before their FRA and rewarded for delaying benefits beyond that up until 70.
When retirees claim benefits before their FRA, their monthly amount is reduced by 5/9 of 1% for each month. If retirees take their benefits more than 36 months early, then their benefits are reduced by an additional 5/12 of 1% per month. On the other hand, for each month retirees delay claiming after their FRA, their benefits are increased by 2/3 of 1% -- up until 70, after which there's no more incentive to wait.
The chart below shows what percentage of their PIA retirees will get depending on what age they start claiming Social Security benefits if their FRA is 67, based on the example of a $1,000 PIA.
| Age to Start Claiming Social Security | Percentage of Benefits at FRA of 67 | A $1,000 PIA Becomes |
|---|---|---|
| 62 | 70% | $700 |
| 63 | 75% | $750 |
| 64 | 80% | $800 |
| 65 | 86.7% | $867 |
| 66 | 93.3% | $933 |
| 67 | 100% | $1,000 |
| 68 | 108% | $1,080 |
| 69 | 116% | $1,160 |
| 70 | 124% | $1,240 |
Source: Social Security Administration
As you can see, the earlier a retiree takes benefits, the bigger the penalty. Claiming at age 62 decreases them by a whopping 30%, whereas delaying until 70 increases them by 24%. That can be a lot -- in this example, the difference between claiming at 62 and 70 is $540 per month ($6,480 annually).
And if you take benefits early it can be difficult to reverse your decision. In fact, there are only two ways: If you've been receiving benefits for less than a year you can still withdraw your application, or once you reach your FRA, you can pause your benefits and earn delayed retirement credits until you are 70.
Make sure you understand
Just because you can get more benefits by waiting longer doesn't mean you should. Deciding at what age to claim benefits should depend on the state of your health and finances. If you have a lot of health issues at 62 and are struggling to afford all of your health-related expenses, then claiming early might be the right move. If you can wait, then in most cases you should.
It's crucial to understand how claiming Social Security at different ages can affect your total benefits. Otherwise, you might end up missing out on benefits you're entitled to and need.
