What you need to know when taking Social Security

Ah, if you only knew when you were going to die. You could not only go ahead and buy those diamond earrings or that new sports car you always wanted without feeling guilty about dipping into your savings account, but you also would know when it would be best to take Social Security.

You can begin to claim your Social Security benefits as early as age 62 or as late as age 70. The longer you wait, the larger your monthly checks will be, says Tad Fyrer, a vice president and branch manager of Charles Schwab in St. Louis. Waiting longer than 70 won't get you a bigger check though.

Jean Setzfund, vice president of financial security for AARP, says that in general it's best to wait as long as you can. The reason is, she says, is that your monthly income increases on average 8 percent a year for every year you wait. "Your checks could be as much as 75 percent higher if you wait until you're 70 rather than collecting at 62," she says.

It's a gamble

However, you could be like Christopher Jones's dad and die a few months shy of your 65th birthday and never collect a dime. Jones, of Sparrow Wealth Management, which has offices in Easton, Pa., and Las Vegas, says he encouraged his dad to retire early when he became ill with melanoma at 63. "But Dad hoped he would beat it," Jones says, "and worked until he died in February."

Of course, no one knows when he or she is going to die. You can consider your health and your family's longevity: Did your parents and grandparents live into their 90s?

The break-even age - the age at which you would collect the same benefits over your lifetime if you start at 62 or wait until your normal retirement age - is 78, says Robert Bruce of Murrieta, Calif., and a former Social Security manager and author of "Social Security Inside Out." Once you live past 78, you come out ahead waiting until your full retirement age to take your benefits, he says.

Other things to consider

But your health and life expectancy aren't the only thing you have to consider when retirement planning and deciding when to take Social Security.

You also have to look at:

• What kind of job you have and whether you can continue to work in your 60s. Some jobs are more taxing - such as those that require physical labor or being outside versus a desk job - and it may be impossible to work well past 62, Fyrer says. Because of the economy, more people are being laid off and it takes older, more experienced workers longer to find another job - if they can at all, Setzfund says. Waiting until your normal retirement age or beyond may not be an option for some people who find themselves unemployed in their early 60s.
• Whether other family members (spouse or minor or disabled children) qualify for benefits based on your work history. If you take early retirement and die, your surviving spouse will only receive what you would have if you were still alive. If you wait until after full retirement to take Social Security then your surviving spouse may receive your full benefit amount plus any retirement credits that you may have accumulated when you die. In some situations, Setzfund says, it may pay for the spouse with the lower income to start collecting earlier and the higher wage earner in the family to hold off until full retirement or beyond.

Every situation is unique

Whatever your situation, Bruce says, it's unique. You should talk to your financial planner about what's best for your situation before going to the Social Security office to claim your benefits.

"Whatever you do," he says, "don't listen to your neighbors or your friends or family members who are getting Social Security. So often that information might have been right for them, but not for you. Get the facts about how much you can collect at what age from Social Security and talk to experts in retirement planning about your options before deciding what to do."

• Get started saving by finding the best savings account now
• See all articles