The Social Security Administration considers the day you can begin receiving benefits to be the day you have reached your full retirement age. It all depends on the day you were born, but the average age is between 66 and 67.

According to the standards set by the Social Security Administration, however, you are eligible to retire at the age of 62. If you reach this age while you are still employed, you may want to begin getting your benefits as soon as possible, but doing so isn't necessarily the strategy that will be the most cost-effective in the long term.

Life Expectancy

The Social Security Administration has criteria established for how long you could live, just as they do for the age at which you want to retire. Around 1930, the average age was around 60 years old; now, the average age is approximately 80 years old. This increase in age is a direct result of medical care improvements and life expectancy. It may seem strange, but if you live to your average life expectancy, your Social Security benefits will be almost the same regardless of when you start collecting them: whether you start collecting them early or wait till later.

To better understand how this works, it is helpful to look at an example with actual numbers. Assume that George is 61 years old and is considering when to begin receiving the benefit. The following data was taken from his Social Security statement and demonstrated how much he might expect to earn in each age bracket:

• Age 62: $1,643
• Age 66: $2,238
• Age 70: $3,009

According to the SSA's figures, the average male 62 years old has a life expectancy of twenty more years, bringing him to 82. As a side note, the Social Security Administration makes adjustments for the cost of living, increasing the amount deducted from your benefit check over the years. However, for the time being, we will put his piece on hold in the interest of keeping things straightforward. Consider the following three choices:

• Assume When George reaches the age of 62, he will begin receiving his monthly benefit check. He will get a total of $19,716 each year, or $1,643 per month, for the next 20 years. He is awarded a grand amount of 394,320 dollars.
• If he remains until he is 66, he will get a retirement of $2,238 per month, or $26,856 per year, for a total of 16 years (to age 82). He is awarded a total of 429 696 dollars.
• If he waits until he is 70 years old, he will get $3,009 every month, which comes to $36,108 per year for the next 12 years (to age 82). He is awarded a total of 433 296 dollars.

Bringing Cost of Living into the Equation

Considering the cost of living adjustment SSA provides, there is an even more compelling argument for George to delay receiving his benefits. The Social Security Administration bases its decision to raise monthly benefit payments on the assumption that the cost of living increases by 2% annually. As a result of this additional benefit, George may anticipate that the more accurate results will be as follows:

• $479,047 at age 62.
• $541,840 at age 66.
• $567,416 at age 70.

Marital Status

Life expectancy is the component that has the greatest impact on future payments for individuals who are not married. A break-even analysis based on how long they expect to live might be a useful place to start for single people attempting to determine when they should start getting the benefit. You should also be aware of how the option you make may affect the taxes you owe for the current or subsequent year.

The social security system is not as straightforward for married couples. One must also consider the possibility of receiving survivor benefits when getting married. After the first spouse's passing, the surviving spouse has the option of keeping whichever benefit is greater between their own and their deceased spouse's: whatever is greater. There are numerous methods in which couples may coordinate how and when they separately take benefits to maximize the amount they get collectively as a pair.

Desire to Protect Purchasing Power

Most people's goal is to start collecting their Social Security payments at age 62. But far too often, people make this decision without knowing how it could influence them in the years to come. They do not consider the potential increase in income that may result from postponing the beginning of their employment by even a few years. If you make a hasty decision about whether to receive your retirement benefits, you might end up forgoing an additional income of between $50,000 and $150,000 if you live long into your 80s.