Applying for Social Security is an exciting milestone for many seniors. Yes, there’s paperwork involved, but you’re just one application away from regular monthly checks for the rest of your life. All told, you could wind up with a lifetime benefit worth hundreds of thousands of dollars. But the exact amount you receive depends on a few factors.
Some of these, like the Social Security benefit formula itself, are out of your control. But you do have a say in other factors, like how many years you work before retiring. The most influential decision you’ll make with your Social Security benefits, though, often happens a lot closer to your application date — and it’s something I strongly urge all retirees to think about before they sign up for checks.
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Choose your Social Security claiming age carefully
The Social Security Administration assigns everyone a full retirement age (FRA) based on their birth year. For most people today, it’s 67, though some older adults have FRAs as young as 66. You have to wait until this age if you want the benefit you’ve earned based on your work history, also known as your primary insurance amount (PIA).
But many people apply earlier than their FRA and a few apply later. The Social Security Administration adjusts their benefits up or down accordingly. You lose 5/9 of 1% per month for up to 36 months of early claiming. If you sign up even earlier than this, you lose another 5/12 of 1% per month. So someone with an FRA of 67 would only get 70% of their PIA per check if they signed up as soon as they turned 62.
Your checks continue to increase past your FRA at a rate of 2/3 of 1% per month until you turn 70. If you wait until this age to sign up, you could get 124% of your PIA per check with an FRA of 67.
To put this in perspective, say you qualified for a $2,000 PIA at your FRA of 67. Claiming at 62 would get you $1,400 per month while waiting until 70 would net you $2,480 per month. That’s a significant difference, but your monthly benefit only tells part of the story.
How to decide when to apply for Social Security
You need to consider two key factors when deciding the best age for you to claim Social Security. The first is your financial situation. Delaying Social Security might get you larger checks and possibly a larger lifetime benefit, but for some, it’s not an option. If you can’t work and you lack personal savings, you may have no choice but to claim Social Security early to avoid debt.
That’s OK. You may be able to compromise by delaying benefits for a few months or a year rather than waiting until your FRA or 70 to apply. This would reduce your early claiming benefit reduction a little.
The other factor you have to consider is your life expectancy. Generally, those with longer life expectancies have more to gain by delaying Social Security. Those who don’t expect to live beyond their 70s typically get their largest lifetime benefit by claiming early. Again, if you’re not sure which is the best option for you, you can choose a middle ground, like your FRA.
Before you apply for benefits, ensure you understand how your claiming age will affect the amount you’ll receive. If you’re worried about short-changing yourself, consider waiting a little longer to give your checks room to grow.