Your Biggest Financial Decision

What’s the biggest financial decision you’ll ever make? Going to college? Buying a house? Maybe, but it may also be true that the biggest financial decision is the decision about when to claim Social Security. And that is a decision where you’ll hear people give opposite advice – some will recommend claiming early, and others encourage you to wait.

Because it’s a big decision, it’s worth exploring your options carefully using readily available online tools. Tool #1 is well-known, but read on to tool #2, as well, because it offers a bonus.

Tool #1: Set up your account at www.socialsecurity.gov and check out your options. Notice how your monthly Social Security income changes depending on your age at claim. You’ll notice that it’s not just what year, but also what month, that matters. For example, if you turn 67 in November, but really don’t have any plans until summer, working an extra 5 or 6 months will give you a higher monthly income.

Tool #2: Check out the Social Security Estimator from the Consumer Financial Protection Bureau (CFPB).  Although this tool is not personalized to your individual history of work and earnings, it does something the Social Security tool does not. It shows the cumulative impact of your decision about when to claim. 

Here’s how the CFPB tool works: You enter your birthdate, and type in how much has been your highest annual earned income in your career. Based on that, it estimates what your social security retirement benefit would be at your full retirement age, and at other ages between 62 and 70. When you select an age, it shows what your monthly income will be, AND (in the left margin) it shows the total amount you will receive from Social Security if you live to the average life expectancy of 85.

graphic depiction of output described.
Combined graphic showing calculator results at ages 62 and 70

I ran an example for a person born in 1960 whose highest earning level was $50,000/year. If they claimed at age 62 and lived till age 85, they would receive a monthly benefit of $1,112 and would have received a total of $305,800 from Social Security during their life. By contrast, if they claimed at age 70 and lived to age 85, their monthly benefit would be $1,958 and their total by age 85 would be $352,440. Note: all these figures would actually be higher, because of adjustments for inflation.

There is no “right” age to claim Social Security; your choice depends on your situation – your needs, other sources of income, health situation, and more. But using available tools, including the CFPB calculator which enables you to easily see the total impact of your decision at age 85, will help you make a well-informed decision. Find more retirement planning information our retirement resource page.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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