A Social Security decision could cost you more than $800 a month | personal financing

However, the average retiree only collects $1,657 per month, according to the Social Security Administration, which adds just under $20,000 annually. This means that if you anticipate relying on your benefits in any capacity during retirement, it pays to make the most of it.

The decisions you make will directly affect how much you receive each month. And one option, in particular, can cost close to $800 a month — claim early.

You can apply for benefits at age 62 or any age after that. But to earn the full benefit amount that you’re entitled to based on your earnings, you’ll need to wait until your full retirement age (FRA) — which is between 66 and 67, depending on the year you were born.

If you file before you reach the FRA, your monthly payments will be permanently reduced. On the other hand, if you delay Social Security beyond the FRA (up to age 70), you will receive a premium award over the full benefit amount. In some cases, the difference between a claim at 62 and 70 can be as high as several hundred dollars per month.

For example, let’s say your FRA is 67 years old. If you were to start claiming at this age, you would receive $1,600 per month.

If you were to apply at age 62, your benefit amount would be reduced by 30%, leaving you with just $1,120 per month. But if you were to wait until age 70 to start claiming, you’d get the full benefit amount plus an extra 24%, or $1,984 per month. That comes in at a difference of $864 per month.

Delaying Social Security is one of the best ways to increase the size of your monthly payments, but it’s not the right decision for everyone.

In theory, the total amount you receive over a lifetime should be roughly the same, regardless of when you started claiming benefits. By registering early, you will receive more checks in total, but each one will be smaller. Delay benefits, you’ll get bigger payments, but lower payments over a lifetime.

However, living a life longer or shorter than average can affect these accounts. To break the tie, you’ll likely need your 80’s. If you live longer than that, you may receive more over your lifetime if you delay Social Security. But if you live a shorter-than-average life, you can file a claim in advance.

Of course, no one can predict exactly how long they will live. But if you’ve been struggling with health issues or have other reason to believe you might not live into your 80s or beyond, it may be worth considering the claim early.

Deciding what age to start claiming Social Security can be tricky, but it’s one of the most important retirement decisions you’ll make. By considering the pros and cons of all your options, you can head into retirement as prepared as possible.

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