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With retirement on the horizon, you’ll likely be making some major life choices: Should you stay in your current home or downsize? Ditch work completely or earn money doing something new? Travel the world or spend time with your grandkids?
But perhaps the most important question you’ll face is when to begin claiming Social Security benefits.
“For many people, that decision is the critical foundation of their retirement plan,” says Jonathan Peterson, author of Social Security for Dummies. “And you live with the consequences until you die.”
According to a study from the Employee Benefits Research Institute (EBRI), two in three retirees depend on Social Security as a major source of their retirement income.
Yet most Americans don’t take the time to fully explore their options. A 2018 survey by The Nationwide Institute found that 88% of people are not fully aware of the factors that affect how much they’ll collect.
What is the best decision?
Should you file for benefits as soon as you’re eligible at age 62, the most popular age to claim? Wait until full retirement age, which ranges from 66 to 67, depending on when you were born? Delay until age 70, when you’ll get the biggest possible monthly check?
The answer would be easy if you knew precisely how long you’ll live, exactly what your future expenses—especially skyrocketing healthcare costs—will be and how your savings might shrink or grow. But without the benefit of a crystal ball, the best you can do is carefully examine your own situation and understand the consequences of your choices.
“There’s no single ‘right age’ because everyone’s personal and financial situation is different,” Peterson says.
Answering these five key questions will lead you to the best choice for you and your family.
Are you still working?
If you’re collecting a paycheck that sufficiently covers your expenses, the expert advice is clear-cut: You shouldn’t file for Social Security until either you stop working or you reach your full retirement age.
“Don’t start collecting benefits at 62 just because you can,” says Kathy Stokes, a senior advisor at AARP who specializes in financial issues.
For one thing, if you’ve got a job and opt for Social Security before full retirement age, your benefits will be held back by $1 for every $2 you earn over $17,040. (Once you reach full retirement age, there is no limit on the amount of money you can earn.)
For another, if you’re at your earnings peak, your salary could help to increase your monthly benefit, which is based on the highest 35 years of earnings that you’ve paid Social Security taxes on.
And, as you likely know, holding off on collecting benefits is a surefire way to increase the amount of your monthly check.
If you start collecting at 62, your benefit will be approximately 30% less than if you wait until full retirement age, according to the Boston College Center for Retirement Research.
Your benefits continue to grow for each year you put off collecting up until age 70, at which point your check would be about 76% bigger than if you’d claimed at age 62. (To find out what your benefit would be at different start ages, use the Social Security Administration’s retirement benefit estimator.)
How’s your health?
The Social Security Administration says that if you’re an average person who lives to the average age, you’ll receive roughly the same total amount from the program no matter when you begin to collect.
The problem is, it’s hard to know just how average you are.
Your health provides a clue.
For people with chronic or advancing health problems who could die prematurely, filing early can make perfect sense. If you’ve got minor health problems now and a strong family history that suggests you won’t live an average life expectancy, claiming at full retirement age may be a reasonable choice.
But if you’re a healthy 65-year-old whose parents lived to their late 90s, delaying as long as possible might be your safest bet.
Here’s why: Unlike your other savings and investments, which are subject to the whims of the market and cycles of the economy, Social Security provides guaranteed inflation-adjusted income that you will receive for the rest of your life, no matter how long you live.
So, if you’re still around at 101 and your other savings have dwindled, you may need to rely more heavily on Social Security. “The bigger payments you get by delaying until 70 could come in very handy in those later years,” Peterson says.
Can you afford to hold off?
If you’re not earning enough to pay the bills, can’t find a job or your health precludes working, or your retirement savings are meager—not uncommon scenarios—there’s not much debate on when to begin. Like many things in life, you gotta do what you gotta do.
The when-to-claim question is also easy if your retirement finances are in tip-top shape.
“If you’ve done the calculations and know that you have plenty to live on—maybe you have a great traditional pension or you’ve saved enough to meet your retirement goals—there isn’t a compelling reason to wait,” says AARP’s Kathy Stokes.
The more challenging decision comes when you’re debating whether to use other income sources so you can hold off on claiming.
If you’ve lost your job, should you look for work so you don’t need that Social Security check just yet? Even if you earn a lot less than your last salary, it might be enough to tide you over until full retirement age.
If working isn’t a practical or preferred option, would you rather take Social Security than draw down as much of your savings, which have to potential to grow and be left to your heirs?
And what lifestyle concessions are you willing to make? Would you rather use your Social Security money to make your retirement more enjoyable now, even if it means you might have to scrimp later?
Different people answer these questions differently, depending on their goals, values and financial situation.
“The important thing is that you think carefully about these questions and don’t just do something because that’s what the guy at work did,” says Brent Neiser, a certified financial planner and senior director of the National Endowment for Financial Education. (Using the tools at myretirementpaycheck.org can help.)
In general, Neiser says, it’s best to use other sources of income as a “bridge” so you can delay claiming Social Security as long as you can.
“There aren’t many other inflation-adjusted, lifetime income streams that most of today’s retirees can count on,” he says.
Will your spouse need your benefits?
If you’re married, you’re not the only one affected by your timing decisions: Your spouse is too.
If you’re the family’s main breadwinner and you’ve claimed Social Security, your spouse is generally entitled—at full retirement age—to a benefit equal to 50% of what your check would be at full retirement age.
While your spouse is entitled to claim that spousal benefit if you claim at 62, doing so translates to a 30% reduction in payments for life. Given the longer average lifespans of women—still most often the lower earner—opting for early benefits could cause pain in later years.
If your spouse outlives you, he or she will be affected by your timing decisions as well: At full retirement age, your spouse can collect the same benefit as you did before you passed away.
That means if you defer payments, you are leaving essentially another form of life insurance for your spouse. If you collect early, your loved one is stuck permanently with a smaller payment.
A surviving spouse can collect even earlier, as young as 60, but doing so will cut the payment by about 30%.
All this argues for delaying Social Security if you want to provide maximum long-term protection for a dependent spouse.
Or, in the words of the Boston College Center for Retirement report, “Claiming later can be the most effective way a husband can improve his wife’s long-term financial security.”
Can you count on Social Security being around?
People who claim early often say they want that money from Uncle Sam as soon as they can get it before the Social Security program goes belly up. In fact, about half of retirees are not confident about the future value of the program, according to the EBRI report.
But while Social Security’s future is a political football and no one can say where it will land, scare stories about its disappearance drastically exaggerate the danger, experts say.
Without any reforms or changes, the Social Security Trust Funds still can pay full benefits until 2034, according to the latest estimate. After that, Social Security taxes paid by younger workers will be sufficient to pay about three-fourths of promised benefits for 75 years.
In any case, given the program’s overwhelming political support, it’s highly likely that people at or near retirement age will get what they’ve been promised.
The bottom line: While delaying Social Security when possible is generally the wisest choice for most people, there are some legitimate reasons for taking it early. But, says Peterson, “Concerns about the program disappearing is definitely not one of them.”
