Claiming Social Security: 5 important things to consider

You become eligible for Social Security benefits at age 62. Tempted as you may be to start receiving these checks as soon as possible, claiming your benefit right away isn’t always the best option. In fact, your check is 25 percent smaller at 62 than if you wait until your full retirement age (66 or 67, depending on the year you were born). Plus, for each year you wait to claim beyond your full retirement age, you can get up to an additional 8 percent per year in benefits.

While waiting to collect Social Security benefits yields a larger monthly check, what if you suffer from a serious illness or don’t expect to enjoy a long life expectancy? This isn’t an easy question to ask—but it is a critical part of your decision. The longer you live, the more money you need to provide for your retirement.

If your relatives all live to 99 (suggesting that you may, too), a decision to delay retirement and hold out for a larger Social Security payment could pay off. But if you’re in a physically demanding line of work, or your family history or personal medical issues are a concern, taking your benefit at a younger age could make sense.

Unlike investments, your Social Security benefit provides you with a guaranteed stream of income that increases as the cost of living goes up. If you delay receiving your benefit until you are older, your Social Security check becomes a larger percentage of your income, so you don’t have to worry as much about inflation, market returns or how long your nest egg might last.

This makes waiting a particularly good strategy for those with low risk tolerance—those who cannot risk the chance of losing money on an investment. For example, if you do not expect to have many other income streams, such as a pension, or withdrawals from other retirement investment accounts, like an IRA, this is an important thing to consider when deciding when to file for Social Security.

If you’re married and you and your spouse are both eligible for Social Security benefits, you can elect to claim them at different times. It might make more sense for both of you to wait, or for one of you to begin claiming benefits at age 62 while your partner postpones until age 70.

When a two-income couple defer collecting benefits until each person is 70, they can increase their expected joint lifetime benefits by more than 20 percent, compared with what they’d receive if they each claimed their benefits at age 62.

While you may understand the benefit of delaying your Social Security claims, you might wonder how you bridge the gap between ages 62 and 70. If you have another source of guaranteed income (such as a pension), it can be easier. Otherwise, you might need to work longer to build up your nest egg or save more to meet monthly expenses during those years.

You have probably worked hard for your Social Security benefits, and your first instinct may be to take them as soon as you are eligible. But if you are able to delay and rely on other income for a few years, it may make a big difference in your retirement.