It can feel like the government has all the power when it comes to setting your Social Security checks, but it's actually a team effort. You can influence your benefit by the number of years you work and how much you earn doing those years.
You also have to make the all-important decision of when to sign up for benefits. Your choice will have long-lasting consequences for your financial security in retirement, so it's crucial to understand what's at stake.
Here, we'll take a look at how your claiming age affects your benefit so you can decide when you'd like to apply for Social Security.
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How the government calculates your Social Security checks
The Social Security Administration takes your average monthly earnings, adjusted for inflation, from your 35-highest earning years and inputs it into the Social Security benefit formula in effect for the year you turn 60. The result is your primary insurance amount (PIA).
You can claim your PIA only if you apply for Social Security at your full retirement age (FRA). This is between 66 and 67, depending on your birth year.
It's possible to claim Social Security as early as 62, but doing so reduces your checks. You lose five-ninths of 1% per month for up to 36 months of early claiming. Those who apply even earlier lose an additional five-twelfths of 1% per month.
Delaying your application slowly grows your checks over time, and this doesn't stop at your FRA. You can continue to wait and you'll increase your checks by two-thirds of 1% per month until you reach 70. That's when you qualify for your maximum benefit.
This makes your claiming age very important in determining how much you get from the program. The following table sums up what percentage of your PIA you'd get per month by claiming at various starting ages.
|
Full Retirement Age (Birth Years) |
62 |
63 |
64 |
65 |
66 |
67 |
68 |
69 |
70 |
|---|---|---|---|---|---|---|---|---|---|
|
66 (1943 to 1954) |
75% |
80% |
86.7% |
93.3% |
100% |
108% |
116% |
124% |
132% |
|
66 and two months (1955) |
74.2% |
79.2% |
85.6% |
92.2% |
98.9% |
106.7% |
114.7% |
122.7% |
130.7% |
|
66 and four months (1956) |
73.3% |
78.3% |
84.4% |
91.1% |
97.8% |
105.3% |
113.3% |
121.3% |
129.3% |
|
66 and six months (1957) |
72.5% |
77.5% |
83.3% |
90% |
96.7% |
104% |
112% |
120% |
128% |
|
66 and eight months (1958) |
71.7% |
76.7% |
82.2% |
88.9% |
95.6% |
102.7% |
110.7% |
118.7% |
126.7% |
|
66 and 10 months (1959) |
70.8% |
75.8% |
81.1% |
87.8% |
94.4% |
101.3% |
109.3% |
117.3% |
125.3% |
|
67 (1960 and later) |
70% |
75% |
80% |
86.7% |
93.3% |
100% |
108% |
116% |
124% |
Data source: Social Security Administration and author's calculations.
To give you some example of how this works in practice, let's say you qualify for a $2,000 PIA at your full retirement age of 67. If you applied immediately at 62, you'd only get $1,400 per month. But you could get as much as $2,480 per month by delaying until 70. This doesn't mean early claiming is always a bad thing, though. Personal factors come into play here.
When should you claim Social Security?
Most workers hope to get as much as possible from Social Security. Delaying your application generally leads to a larger lifetime benefit, but this may not be the case if you have a short life expectancy. Those with terminal illnesses or a poor personal or family health history may prefer to sign up earlier rather than run the risk of not getting benefits at all.
You may also not be able to delay Social Security if your finances prohibit it. If waiting would cause you to fall behind on your bills, it's not worth it.
Married couples also have to weigh how their decision could affect their partner. If one wishes to claim a spousal benefit, they must wait until their partner signs up before they can claim. And they'll only get their spousal benefit if it's worth more than their own retirement benefit.
It's worth coming up with a tentative claiming age now so you can estimate how far these benefits will go in retirement. But don't be afraid to change your decision as your life and Social Security evolves.
If you're still not sure what your best move is, consider making a my Social Security account. There's a tool there that can help you estimate your monthly benefit at every claiming age based on your work history to date.
Think about how many months you expect to claim checks, and multiply this by your estimated benefit amount at the age you're considering to get your estimated lifetime Social Security benefit. Do this for a few ages and whenever possible, choose the claiming age that you believe will net you the most money overall.
