Deciding when to claim Social Security benefits is an important decision most Americans have to make in the years leading up to retirement. In its simplest form, the decision comes down to whether someone wants smaller monthly payments for a longer period or larger monthly benefits for a shorter period.
Like most financial decisions, there's no one-size-fits-all answer to when is best, but there is research that hints at what's likely best for most people.
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How your claiming decision affects your monthly benefit
Your full retirement age is when you are eligible to receive your base monthly benefit, called the primary insurance amount (PIA). For anyone born in 1960 or later, this age is 67. You don't have to claim benefits at your full retirement age, though. You can claim as early as age 62, but your monthly benefit will be reduced depending on the time until your full retirement age.
In the first 36 months before your full retirement age, monthly benefits are reduced by 5/9 of 1%. Each additional month will further reduce them by 5/12 of 1% per month. Assuming your full retirement age is 67, here's how much your benefits will be reduced based on claiming age:
- Age 66: 6.7%
- Age 65: 13.33%
- Age 64: 20%
- Age 63: 25%
- Age 62: 30%
If you decide to delay benefits past your full retirement age, you'll receive a 2/3 of 1% monthly boost until you reach age 70. This works out to an 8% annual increase and 24% total increase if you delay until 70.
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When should you claim Social Security?
There is no straightforward answer to this because people's situations call for different strategies. However, studies have shown that claiming at some ages is preferable to others.
The National Bureau of Economic Research published a paper in 2022 that essentially argued that anyone age 45 to 62 is better off waiting until after 65 to claim benefits. And to dig deeper, it says more than 90% of people should wait until the latest age to claim benefits. Unfortunately, only around 1 in 10 people do.
The reason for delaying until 70 comes down to the total benefits you have a chance to receive over a lifetime. Most people live past the Social Security break-even ages -- the age when the total benefits from claiming at two different ages equals out -- so delaying benefits would result in more lifetime benefits.
Now, if Social Security is most or all of your retirement income, by all means, claim as soon as you need it. Everybody's situation will make some claiming ages more ideal. But if you can reasonably cover your lifestyle without touching your Social Security, consider delaying to potentially maximize your lifetime benefits.
