Social Security plays a vital role in the financial well-being of older Americans. That makes the decision of when to start claiming your Social Security benefits extremely important, because it'll have a permanent impact on your financial future. In general, the longer you wait, the bigger your payments will be once you start getting them.
Everybody likes big Social Security checks, so you'll find plenty of people advising you to wait as long as possible before you claim your benefits. With certain types of Social Security benefits, waiting until age 70 is the best way to get the maximum-sized monthly check possible. However, that's not the case for all Social Security benefits. In some cases, you'll be far better served by taking your Social Security years before you turn age 70 -- even if you're looking to get the biggest checks you can.
The source of Social Security confusion
The problem that gets so many Social Security recipients in trouble is that the rules for different types of Social Security benefits aren't the same. In particular, there's a huge disparity between the rules that apply to people seeking benefits based on their own work history and the rules for those looking to claim benefits based on their spouse's work history.
Claiming at age 70 is a legitimate option for those claiming retirement benefits based on their own work history. Claiming at full retirement age -- which can vary between 66 and 67 for those retiring now -- gives you your base monthly benefit as calculated by the Social Security Administration. Claim earlier than that, and you'll give up between 5% and 6 2/3% per year before full retirement age, with a minimum age of 62. Claim after that, and you'll get delayed retirement credits of 8% per year, with a maximum age of 70. After that, you won't get any additional delayed retirement credits.
However, claiming at age 70 doesn't make sense for those relying solely on spousal benefits based on your spouse's work history. Similar rules apply to early claims, with a reduction of benefits of between 5% and 8 1/3% per year before full retirement age. However, claiming after full retirement age doesn't give you anything extra, because delayed retirement credits aren't available for spousal benefits. Waiting years after full retirement age to turn 70 just results in your missing out on monthly checks you'd have been entitled to receive.
What if you can get both?
The situation does get somewhat more complicated for those who have both their own work histories and the potential to claim spousal benefits on a spouse's work history. In this case, the right strategy can depend on your age. Those who turned 62 in 2015 or earlier have the option to file as a spouse first when they reach full retirement age while still deferring the payment of their own retirement benefit. They can get spousal benefits well before age 70 but still let their retirement benefit earn delayed retirement credits. Then at age 70, they have the ability to claim their own retirement benefit, which presumably will be higher.
This strategy doesn't work for younger people, however, because the law changed to force those filing for spousal benefits to claim their own retirement benefit at the same time. In that case, you might want to forego claiming spousal benefits at full retirement age if by doing so your own retirement benefit will keep growing even larger.
Take the money
There are, however, millions of people who rely solely on spousal benefits for Social Security income. For them, claiming well before age 70 is the right choice to avoid missing out on hard-earned monthly checks.