Should I Take Social Security at Age 66?

This article was updated on Aug. 24, 2017, and originally published on March 25, 2016.

The decision to start claiming Social Security benefits is not one to be taken lightly. Claiming Social Security isn't the same thing as depositing a refund check you received in the mail, or cashing out a bond. The age at which you first claim Social Security will dictate how much money you'll receive in benefits for the rest of your life, and while 66 is a smart age for some people to start taking benefits, others would be wise to wait longer.

Why your age matters

Here's a snapshot of how Social Security works: If you work and pay into the system, you become eligible to receive your benefits in full once you hit what's known as your full retirement age. For those born between 1943 and 1954, the full retirement age is 66. Anyone born in or after 1960, meanwhile, will have a full retirement age of 67. And for those born between 1955 and 1959, full retirement age falls somewhere between 66 and 67.

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The following table will help you find your full retirement age depending on your year of birth:

DATA SOURCE: SOCIAL SECURITY ADMINISTRATION.

To claim or not to claim

If you claim your Social Security benefits once you reach your full retirement age, you'll get 100% of whatever amount you're eligible for based on your work history; but if you delay taking benefits, you'll get even more. So if your full retirement age is 66, and you're retired, about to leave the workforce, or simply need money, taking those benefits is a good idea. On the other hand, if you're still working full-time at 66, are semi-retired with a source of income, or have enough cash flow to pay your current living expenses, you should hold off on taking benefits at 66, even if that's your designated full retirement age.

Delayed benefits mean higher benefits

When it comes to Social Security, good things come to those who wait -- namely, higher monthly benefits. For every month you hold off on claiming Social Security, your benefit will go up. If your full retirement age is 66, you'll get an 8% boost in benefits per year for a total of four years. Once you reach 70, there are no additional financial incentives to delay taking benefits, so you might as well claim them at that point. But if you do hold off once you hit 66, your increased benefit amount will stay with you for as long as you continue to collect benefits.

Now let's run some numbers. Let's say your full retirement age is 66, and you're eligible for $1,200 per month in Social Security benefits. If you start taking benefits at 66, and live till the age of 90, you'll collect a total of $345,600 in benefits. Now let's say you decide to delay benefits till age 70. At that point, your monthly benefit will be $1,584 thanks to the 32% increase you'll accumulate by waiting. If you live till 90, you'll collect a total of $380,160. In other words, holding off on taking benefits could result in an extra $34,560 in your lifetime.

Claiming early means losing out -- but not always

Just as you're rewarded for delaying Social Security, you'll get penalized for taking your benefits early. You're technically allowed to start taking Social Security at 62, but the earlier you claim those benefits, the lower they'll be. So let's say your full retirement age is 67, but you decide to start taking benefits at 66. Doing so will reduce your benefits by about 6.7%, which means that if you were otherwise eligible for a monthly benefit of $1,200, that figure will be knocked down to $1,120.

Now let's assume you'll live till 90. If you hold off on benefits at 66, and claim them at your full retirement age of 67, you'll collect a total of $331,200 in your lifetime. If you start collecting at 66, you'll amass a total of $322,560, which is $8,640 less than you would've gotten by waiting the extra year.

But now let's apply a nice dose of pessimism. What if your full retirement age is 67, only instead of living till 90, you only make it to 75? Assuming a $1,200 monthly benefit, claiming at 67 would give you a total of $115,200, while claiming at 66 would give you $120,960. In other words, you'd come out ahead by $5,760 by taking those benefits a year early despite the reduced rate.

In the absence of being able to predict the future, it's hard to say whether taking benefits early will work for you or against you in the long run. The key, therefore, is to weigh the pros and cons of claiming Social Security at various ages, and see what makes the most sense for you.