Ultimate Retirement Guide

When you should file for Social Security benefits

Waiting to claim Social Security benefits can significantly boost your guaranteed lifetime income in retirement.

If you wait until you're 70 years old to claim Social Security, you can raise your monthly benefit check by up to 76 percent, according to research by David Laster, Bank of America Merrill Lynch's head of retirement strategies, and Anil Suri, the firm's head of portfolio construction and investment analytics. That wait can reduce the risk of outliving your money in retirement and, for many, increases expected lifetime benefits.

Retirees are getting better at delaying gratification. The earliest Americans can claim Social Security retirement benefits is at age 62, but if they do, those benefits will be reduced as the recipients are not yet at full retirement age. Nonetheless, last year, 35.5 percent of men and 40.8 percent of women who started collecting Social Security claimed benefits at that age, according to the Social Security Administration. Those figures are much better than a decade earlier when half of men and 54.9 percent of women filed for Social Security at 62.

But only 41.5 percent of men and 34.9 percent of women filed for Social Security last year at full retirement age, the time when you collect full benefits, or later. If you were born between 1943 and 1954, you can claim full benefits at age 66. If you were born between 1955 and 1959, your full retirement age increases by two months for each additional year. If you were born in 1960 or later, you can claim full benefits at age 67. Retirement benefits grow by about 7 to 8 percent each year from age 62 until age 70.

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Part of the problem for many retirees is a lack of knowledge about the value of their benefits.

"Social Security isn't handing out a buyer's guide and user manuals," said Rob Kron, head of investment and retirement education at BlackRock. "We don't know really know what we bought."

The median expected value of lifetime retirement benefits from Social Security is $230,000 for single people and $470,000 for couples, Laster estimates. For high earners, those in the 90th percentile of income, it's even better with an expected value of benefits of $390,000 for single people and $710,000 for couples.

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Your decision to claim Social Security benefits should take into account your health, life expectancy, marital status, retirement savings and income needs.

Although many Americans miss out by collecting benefits before their full retirement age, most retirees say they wouldn't change the age they started receiving their Social Security benefits, according to a recent survey by the Nationwide Retirement Institute. In June, the institute polled 299 people who had been retired for more than 10 years, 302 people who had been retired less than 10 years and 301 people over age 50 who haven't retired yet. Seventy-six percent of recent retirees and 68 percent of older retirees said they would not change when they claimed benefits.

Nationwide found that the reasons for claiming Social Security early differed among recent retirees and people who retired 10 years ago. Forty-four percent of recent retirees did so because of employment reasons, the top motivation for that group in the survey, while health reasons were the main cause for people who claimed benefits early a decade or more ago.

Nearly a quarter of people surveyed by Nationwide who plan to claim benefits early are doing so because they do not believe Social Security will be around for them at full retirement age. "That's a huge misconception," said David Giertz, president of distribution and sales at Nationwide Financial.

The Social Security Administration forecasts that its trust fund for retirement benefits will be exhausted by 2034. However, even if Congress does nothing to shore up one of the nation's most popular federal programs, the Social Security Administration projects it will have enough money from payroll taxes to cover three-quarters of retirement benefits promised to retirees through 2090.

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Longevity worries are another big reason for people to claim Social Security benefits early. Twenty-two percent of people near retirement who want to claim early told Nationwide they plan to do so because they don't expect to live long enough to make waiting to optimize their benefits worthwhile.

However, most people retiring now will live decades in retirement. The average 65-year-old man today will live to age 84 and the average 65-year-old woman can expect to live until almost 87, according to the Social Security Administration.

And people are leaving huge sums of lifetime income on the table if they make the wrong decision about Social Security. Financial Engines, the nation's largest registered investment advisor, estimated that retirees miss out on as much as $100,000 for individuals and $250,000 for married couples. (The estimates were based on a 2014 survey of 1,008 people between the ages of 55 and 70 who have an annual household income of at least $50,000.)

Free tools can help in determining when to claim benefits. The Social Security Administration's Retirement Estimator gives benefit forecasts based on your actual Social Security earnings record and Financial Engines also offers a free Social Security planner.

"When to claim Social Security is one of the most important retirement decisions people will ever make," Giertz said. "You need to think through all the financial consequences."