What is Social Security?

You can start collecting Social Security at age 62. Cashing in on all of the money you put into the system as soon as possible may sound enticing, but you won’t receive the full benefit you would if you waited until your full retirement age. And if you wait until after your full retirement age, you will get more than your full benefit. It is a very complicated decision. Here are some things to think about before you claim, because there’s no going back once you do.

What is Social Security?

The purpose of Social Security is important to consider before you decide when you want to claim your benefits. It is a social safety net intended to provide retirees with a basic level of income after they stop working. Essentially, it helps reduce poverty among older adults.

If you have substantial retirement savings, Social Security might be a nicety and not a necessity. If you do not have material retirement savings, Social Security will likely be a necessity. That will be doubly true if you are forced to stop working for some reason. In which case, claiming when you need the money, even if that’s right away at 62, may be your only option.

There’s only one way to know the best time to claim Social Security

If you have the luxury of choosing when you claim Social Security, there is one sure-fire way to know the best time: know exactly when you are going to die. Unfortunately, or perhaps fortunately, few people know that date. So the best that most people can do is make an educated guess. However, the math behind the payment process is pretty clear.

The Social Security Administration lays it out in simple-to-understand numbers. If your full retirement age is 67, as it is for people born in or after 1960, and you are entitled to a $2,000 payment, you will get $2,000 if you claim then. However, if you claim at 62, the earliest you can do so, you will only receive a check for $1,400. If you wait until 70, meanwhile, your check will increase to $2,480.

Data Source: Social Security Administration.

Claim early, get less; claim late, get more. Pretty simple: if you want the highest benefit, you should delay. But there’s a breakeven point you need to consider, because while you don’t know when you will die, the average life expectancy of men and women is known. On average, U.S. men live until roughly age 75. The average U.S. woman lives until about 81.

The breakeven for most people will fall between 78 and 80 if you claim at 62 rather than waiting until full retirement age. Basically, if you live materially longer than 78 to 80, the total benefits you collect over your lifetime will be less if you claim early. The breakeven compared to waiting to claim until age 70 is around 80-84 for most people. Based on this math, the “average” person should probably claim early. Not surprisingly, lots of people claim at age 62.

Still, the National Bureau of Economic Research examined this topic in 2022. The study authors believe that virtually everyone should wait until after 65 and that 90% should wait until age 70. Interestingly, there’s another big spike in claims at age 66 and then a smaller one at age 70. The researchers found that those with the least financial resources would benefit most from delaying when they claim Social Security. However, this is the group that will likely have the hardest time waiting if a health issue forces them to stop working.

You have to make an educated guess about when to take Social Security

The big unknown with claiming Social Security is the date of your own death. Because of that fact, you have to take a realistic look at your health when you make your decision. But that’s not the only factor to consider, since your retirement savings, among others, play a big role in the decision-making process, too. In the end, it seems likely that delaying, if you can, is the best way to maximize your check. But, since few people are exactly average, that may not work well with the life you are living.