Well, maybe not everything, but the decision of when to claim Social Security benefits will have a lasting impact on the amount you receive.

Generally speaking, you’re eligible to receive 100% of your Social Security benefit at your full retirement age (FRA)[1]—currently between ages 66 and 67 depending on your birth year; however, you can start receiving benefits as early as 62 and as late as 70.

If you decide to claim benefits before your FRA, the benefit amount will be reduced. (Obviously, the earlier you claim, the larger the reduction.) On the other hand, for each month you delay claiming Social Security, your benefit amount increases until you reach age 70, after which the benefit amount does not increase.

If you were born between 1943 and 1954, here’s a high-level summary of the benefit percentages:

high-level summary of the benefit percentages 1943-1954

For those of you born after 1960, the 75% drops to 70% and the 132% drops to 124%. Sound confusing? Well, it certainly can be, and we’ve only just started.

In the interest of keeping this as succinct as possible, I’m going to cover this issue at a high level. My hope is to make you aware of things to consider and further investigate before making a decision.

How do you decide?

Traditionally, the decision of when to begin Social Security benefits was largely based on need: If you needed the benefits to meet basic living expenses, then you would take them.

This hasn’t changed. What has changed is that people are living longer, so the impact that this decision has on an individual’s or a couple’s financial security is even more important. As a result, this decision—like so many other retirement income decisions—warrants careful consideration.

So the first consideration is still need, but how do we define need?

“Need” is commonly defined as having no other money, such as employment income, personal savings, or retirement savings, to meet your basic living expenses.

Historically, many retirees have thought they’d rather spend the government’s money than their hard-earned savings. I don’t disagree, but it’s important to be aware of all the facts as you consider your needs.

Let’s start with the premise that it’s usually advantageous to delay collecting benefits to age 70[2]—even though this may require you to continue working or use your personal and/or retirement savings to fill the gap years. Why? There are two primary reasons.

First, for a 65-year-old couple,[3] there’s a more than 60% chance that one of you will live to age 90. So delaying benefits for you and/or your spouse to have the potential to receive a higher benefit amount for a longer period of time is likely to be the better financial decision.

Second, every year you delay taking benefits beyond the earliest possible starting point will boost your annual payout by as much as 8%, and this figure is adjusted for inflation. Let’s face it: A guaranteed return of up to 8%, in real terms, is not easy to find in the current economic environment, especially on a risk-free basis.

The decision of when to claim your Social Security benefits can be complicated, to say the least. Many couples aren’t the same age and don’t have similar earnings histories or life expectancies. To me, this is one of those areas where putting in the time to think things through—and seeking the advice of a professional—may really pay off over the long term.



I would like to thank my colleague, Katherine Lamb Kellert, for her contribution to this blog.

[1] Currently age 66 if you were born between 1943 and 1954 or 67 if you were born after 1960. For those born between 1955 and 1960, two months are added to the full retirement age each year.

[2] Typical reasons for not delaying benefits include: financial need, poor health and/or a shorter than average life expectancy.

[3] I’m focusing on couples in this illustration because the considerations tend to be more complicated.