If I Could Tell All Retirees 1 Thing About Social Security, I'd Say to Do This Before You Claim Benefits
Social Security is at the center of most seniors' retirement plans. In the most recent edition of an annual Gallup poll, 60% of retirees said Social Security is a major source of income; another 28% said it plays at least a small role in their budget. And the trend shows that it's become more and more important to seniors in recent years.
So it's key that you do everything you can to optimize your Social Security claiming decision. That means being aware of everything that can affect your monthly benefit. That's why the most valuable thing anyone can do before claiming Social Security is seeing exactly how delaying their application can change the size of the check they receive.
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One of the biggest factors in the size of your benefit
There are only three factors that affect how much you receive from Social Security:
- How much you earned during your career
- When you were born
- When you claim benefits
By the time you retire, not much is going to change the amount you've earned over your career. Maybe if you start a side hustle, you'll find it blossoming into a second career in retirement, but most people fully stop working when they retire.
The year you were born isn't going to change, unless you create some sort of machine in retirement that tears holes in the fabric of the space-time continuum. But the year you were born will determine a very important number when it comes to your Social Security benefit: your full retirement age. That's the age at which you're eligible to receive 100% of your benefit.
Those born from 1943 to 1954 reached full retirement age at 66. The age increases 2 months for each year you were born after that, until maxing out at age 67 for anyone born in 1960 or later.
That leaves just one factor truly in your control in retirement: when you claim benefits. Most people become eligible to claim Social Security benefits at age 62, but claiming before full retirement age will result in a reduction in your personal retirement benefit of up to 30%. Those claiming spousal benefits will see an even bigger reduction for claiming early.
You can also opt to wait beyond your full retirement age. For every month you delay benefits, you'll increase your monthly check by 2/3 of a percentage point until you reach age 70.
The following table shows just how much you'll receive as a percentage of your standard benefit (what you qualify for at full retirement age), based on when you were born and the age at which you claim:
| Year of Birth | Age 62 | Age 63 | Age 64 | Age 65 | Age 66 | Age 67 | Age 68 | Age 69 | Age 70+ |
|---|---|---|---|---|---|---|---|---|---|
| 1943-1954 | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% | 132% |
| 1955 | 74.2% | 79.2% | 85.6% | 92.2% | 98.9% | 106.7% | 114.7% | 122.7% | 130.7% |
| 1956 | 73.3% | 38.3% | 84.4% | 91.1% | 97.8% | 105.3% | 113.3% | 121.3% | 129.3% |
| 1957 | 72.5% | 77.5% | 83.3% | 90% | 96.7% | 104% | 112% | 120% | 128% |
| 1958 | 71.7% | 76.7% | 82.2% | 88.9% | 95.6% | 102.7% | 110.7% | 118.7% | 126.7% |
| 1959 | 70.8% | 75.8% | 81.1% | 87.8% | 94.4% | 101.3% | 109.3% | 117.3% | 125.3% |
| 1960 or later | 70% | 75% | 80% | 86.7% | 93.3% | 100% | 108% | 116% | 124% |
Data source: Social Security Administration. Calculations by author.
You don't have to do the math yourself
The Social Security Administration (SSA) has an online portal that provides tons of information and tools you can use to help stay on top of your Social Security benefits. If you sign up for a "my Social Security" account, you'll be able to see your earnings history and access a tool that will show you exactly how much you'll receive from the government program at any given age from 62 to 70.
Be sure to check this tool before you claim benefits. It can provide valuable insight into whether it's worth it to you to delay benefits or claim them early. If you know your spouse's primary insurance amount (they can look it up in their own "my Social Security" account), you can compare your personal benefit with what you could receive as a spouse.
For example, if you could receive a larger spousal benefit at your full retirement age than if you waited to collect your personal benefit at age 70, it's probably best to just claim your spousal benefit. However, the choice isn't always so clear.
A simple rule of thumb is that (like the majority of retirees) you'll probably be better off waiting to claim your personal benefit, compared to claiming it as soon as possible. While you'll forgo a monthly check in your 60s, the bigger checks you'll receive in your 70s, 80s, and beyond make up for it. As life expectancy continues to advance, the average person will live more than long enough to collect the most in lifetime Social Security benefits by waiting until age 70 if they can.
The big exception is if you have a good reason to think your life expectancy will be shorter than average. A chronic medical condition or a poor family health history may be enough to sway you in favor of claiming earlier.
Household dynamics can complicate your claiming decision as well, making full retirement age, or even age 62, the best age to claim in some instances. For complex household claiming decisions, it's best to consult a professional financial planner regarding your personal situation.
If you go into your decision having consulted the tool on the SSA website and understand how the timing of your claim will impact your monthly benefit, you'll set yourself up to make the best decision to get what you need from the program.
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