When Should You Claim Social Security Benefits?

By Mitchell J. Smilowitz, CPA

For most of us, Social Security will make up a significant portion of our retirement income. Because Social Security benefits vary by the age you begin receiving them, this is one of the biggest retirement planning decisions you will make. This article addresses some of the factors to consider surrounding when to begin collecting Social Security.

What Is Your Full Retirement Age?

Your Social Security benefit is calculated in relation to your Full Retirement Age. Those who begin claiming benefits before reaching their Full Retirement Age receive less each month; those postponing benefits beyond their Full Retirement Age receive a larger monthly benefit. This decision will affect the size of your benefit for the rest of your life.

Full Retirement Age for Social Security benefits is gradually increasing to age 67. The following table shows the Full Retirement Age for Social Security based on the year you were born.

Year of Birth
Full Retirement Age
66 and 2 Months
66 and 4 Months
66 and 6 Months
66 and 8 Months
66 and 10 Months
1960 and Later

How Do Benefits Vary?

Your Social Security benefit is based on the number of years you contributed and the amount you earned during those years. You must contribute to Social Security for at least 40 quarters (10 years) in order to be eligible. Social Security averages your highest 35 years of earnings to determine your benefit. The formula also accounts for inflation.

You can begin collecting Social Security retirement benefits as early as age 62, but it will be at a reduced amount. The monthly benefit increases the longer you wait to collect – up to age 70. The monthly benefit does not increase once you reach age 70 regardless of how much longer you wait to begin.

Beginning your benefit at age 62 – the earliest age possible – reduces your benefit by approximately 25% compared with the benefit available at your Full Retirement Age. Delaying beyond Full Retirement Age increases your benefit by 8% per year until age 70.

The Social Security Administration provides an on-line calculator that allows you to estimate your benefit based on your date of birth, estimated annual earnings and planned retirement date.

When Should You Begin Collecting Social Security?

As with many decisions involving financial and retirement planning, there is no one-size-fits-all answer. But there are several issues to consider before you choose when to begin Social Security.

  • Longevity. If you are in poor health, you may decide to claim Social Security sooner even though you receive a smaller benefit. Conversely, if you are in good health, you may consider delaying Social Security in order to maximize your monthly benefit.
  • Working while receiving benefits. If you begin collecting Social Security before your Full Retirement Age, your Social Security benefit is reduced for each dollar earned above an annual threshold. At Full Retirement Age, working no longer reduces your benefit.
  • Income taxes. You may owe taxes on your Social Security benefit. Visit the Social Security website to estimate your tax liability.
  • Spousal benefits. It is important to coordinate when you and your spouse begin Social Security benefits. The ability of your spouse to claim their own Social Security benefit can impact the decision on when to begin yours. For example, if your spouse’s benefit provides the income you need in the early years of retirement, you may decide to postpone collecting Social Security and let your monthly benefit increase. If the higher earning spouse dies first, the surviving spouse receives the benefit of the higher earning spouse.

Choosing when to begin collecting Social Security plays an important role in your retirement planning. Your decision depends on your other sources of retirement income, your health and you and your spouse’s work plans. This article provides basic information on these topics; to discuss effective ways to integrate Social Security into your retirement income, please contact the JRB  or call 888-JRB-FREE (572-3733).

March 2024