Social security 101

If you have worked and paid money into the Social Security system for at least 10 years, you are generally eligible to receive Social Security benefits when you retire. Most Americans rely on these benefits to provide a portion of their income during retirement. While Social Security probably will not cover all your financial needs, the income can reduce the amount you need to withdraw from your savings in a given year.

The year you elect to start receiving your Social Security benefits can make a difference in your retirement planning. Although you can elect to receive Social Security benefits once you reach age 62, waiting until as late as age 70 will increase your monthly benefit and may help maximize the total amount you receive.

The right time to claim benefits depends on your unique situation. Here’s what to consider when making that choice.

What affects the size of my benefit?

The Social Security benefit you receive depends on three factors:

  1. Your career earnings. The size of your full benefit is determined by a formula that considers monthly earnings during your top 35 earning years. You can use the Social Security Administration’s benefits calculator to estimate the amount of your monthly check. The average monthly benefit in 2024 was $1,907.

  2. Your full retirement age. The Social Security Administration will only pay your full benefit after you reach “full retirement age.” That age is set by law and depends on the year you were born. The government allows you to collect Social Security benefits earlier than your full retirement age at a reduced rate. For example, if you were born after 1960 and you started taking benefits at 62, your monthly amount would be 30% lower than if you waited until age 67. You can use the Social Security Administration’s retirement chart to determine the amount by which your benefits will be reduced if you start receiving them at age 62 up to your full retirement age.

  3. Delayed retirement credits. Waiting to claim Social Security past your full retirement age can increase your benefits further. You can accumulate delayed retirement credits between your full retirement age and age 70. Each yearly credit increases your monthly benefit by 8% – so if you waited until age 70, you could wind up with monthly payments equaling 124% of your full monthly retirement benefit. The highest benefit for top lifetime earners is capped at $4,873 a month for 2024 and is only available to people who start claiming at age 70.1

How do I decide when to begin claiming Social Security?

Here are some things to consider as you decide what age is best for you:

  1. How long you expect to live. If you have significant health issues that may reduce your life expectancy, you might want to claim benefits before you reach full retirement age. According to the Social Security Administration (SSA), men who reach 65 have a total life expectancy of about 84 years, while women who reach 65 can expect to live until about age 87, on average. The longer you expect your retirement to be, the more advantageous it may be to wait and receive a larger monthly benefit.

  2. Whether you plan to work during retirement. If you intend to work part time or turn a hobby into a business to supplement your income, it’s generally wise to delay claiming Social Security until at least your full retirement age. Between the ages of 62 and full retirement age, the SSA will temporarily reduce your retirement benefit if you earn more than a certain amount. Once you reach full retirement age, your benefits will not be affected by how much money you earn.

  3. Whether your spouse is eligible for Social Security benefits. If both you and your spouse are eligible for Social Security retirement benefits, you need to determine when each of you will start collecting them. If you both plan to retire before full retirement age and are depending on the steady income Social Security provides, one spouse could claim early and take a reduced benefit, while the other could wait until age 70 to maximize their monthly amount.

Even if your spouse does not qualify for Social Security retirement benefits based on their earning history, they may be able to receive spousal benefits after you claim Social Security as long as they are at least 62 years old. If they take spousal benefits at age 62, they will receive 32.5% of your benefit amount. The percentage increases to a maximum of 50% of their full retirement age.

Planning ahead

Social Security is an important part of nearly every American’s retirement income plan. Understanding how your age affects Social Security can help you maximize your benefits. When deciding the right time to claim Social Security, consider your health, whether you plan to work in retirement and your spouse’s eligibility. If you have a difficult time figuring out the right choice for you, a financial advisor can help decide the best time to start claiming Social Security based on your particular circumstances.