When to start collecting Social Security

Social Security cards on money

You've paid into Social Security for years, and now you're finally reaching the age at which you could start collecting your hard-earned benefits.

But when should you begin? Is it smart to sign up for a check as soon as you turn 62, the youngest possible age?

Or should you wait until you'll qualify for a bigger monthly payment?

If you decide to wait, how long is too long?

Deciding when to start Social Security is one of the most important retirement decisions you'll make.

There’s a lot to consider, including your personal finances, but here are 6 steps that will help you make the right call.

Step 1. Find out where you stand.

You need to know how much your benefits will be and when, exactly, you'll reach what the Social Security Administration (SSA) considers "full retirement age," the age at which you can receive those benefits without penalty.

Your benefits are based on your lifetime earnings. If you're over 60 but not yet receiving benefits, you should receive a statement in the mail from the SSA reviewing your potential benefits at different retirement ages.

The rest of us will need to get an online statement from Social Security.

Uncle Sam also has been moving up full retirement age, which used to be 65 for everyone. That's now only true for people born in 1937 or earlier, who are all now way past 65 anyway.

For everyone else, it gradually increases, depending on the year you were born, until it reaches 67 for people born after 1959.

There's a retirement age calculator that will let you know when you hit the magic date.

Typical Social Security Monthly Retirement Payments

Recent average annual income Begin benefits at 62 (early retirement age) Begin benefits at 66 (full retirement age) Begin benefits at 70 (delayed retirement age)
$35,000 $842 $1,1158 $1,596
$55,000 $1,117 $1,546 $2,147
$75,000 $1,392 $1,934 $2,698
$95,000 $1,612 $2,190 $2,976
$115,000 $1,741 $2,371 $3,234

This calculator will let you see the benefits someone your age, making your income, is likely to receive.

Step 2. If you're out of work or in financial trouble, take the money as soon as you can.

The earliest you can collect benefits is age 62. But you'll pay a penalty of 25% or more in your monthly benefits by filing before full retirement age.

You also could lose more if you continue working while collecting a monthly Social Security check. Until the year you reach full retirement age, your benefits will be cut by $1 for every $2 you earn over a certain amount annually. For 2015, that amount is $15,720.

That is why retirement experts generally suggest you wait until you reach full retirement age, or even older, before filing for benefits.

But if you're unemployed and out of savings, or if you're only working part-time and finding it impossible to make ends meet, then none of the above is as important as your immediate need.

The decision is really a no-brainer. Take the money as soon as you qualify.

Getting less per month is better than waiting and sinking into debt or financial ruin. Yes, you'll be getting less, but you'll also start collecting earlier, and you might be surprised how long it takes to make up the difference.

The government uses the example of someone who can receive $750 a month at 62 or $1,000 a month at a full retirement age of 66. A person starting early earns $3,000 less a year, but also has collected $36,000 in benefits by age 66.

Someone who waits until 66 to start collecting will need 12 years, until age 78, to make up that difference.

Step 3. If you're working and in good health, wait at least until full retirement age.

Twelve years is a long time, so why shouldn't everyone take the money as soon as possible?

First, retirement is likely to be longer than you think. The government provides a calculator where you can get a rough estimate of how long someone your age is likely to live.

On average, men turning 62 this year have about 22 years ahead of them, while women have closer to 25 years left.

Many of us will live much longer: More than one out of every three 65-year-olds today will live to 90, according to the SSA.

Payments continue as long as you're alive, so those extra years of bigger monthly checks can matter a lot.

Second, the later years of our careers are often the best-paying, helping to boost benefits down the road. Every year you pay into Social Security increases the size of your monthly check once you start collecting.

"Each case is unique," says Fred Amrein, a certified financial planner in Wynnewood, Pennsylvania, who often works with clients on retirement plans. "But the general rule is, delay it as long as you can."

Third, you no longer face a penalty for working once you hit full retirement age.

You can work as much as you want and still receive your full benefits. (However, depending on how much you make, you may have to pay federal taxes on part of your benefits. IRS Publication 915 provides more information.)

If you're married, there's one last reason to consider waiting. If you die before your spouse, he or she can often collect a survivor's benefit based on your earnings. But if you elect to take early benefits, your spouse will receive a reduced check after you're gone.

Step. 4. If you really like your job, wait even longer, but not beyond 70.

One of the oddities of Social Security is that full retirement age isn't the point at which you reach your maximum possible benefits. Keep working and paying into the system, and you can earn even more later.

The size of the increase depends on when you were born, but for everyone born in 1943 or later, it's 8% annually or 0.66% a month. In the government's example, someone who earns $1,000 at a full retirement age of 66 boosts his or her monthly benefit to $1,320 by waiting until 70.

How Much Benefits Increase for Delayed Retirement

Year of Birth Annual Increase in Benefits Monthly Increase in Benefits
1933-1934 5.5% 0.45%
1935-1936 6.0% 0.50%
1937-1938 6.5% 0.54%
1939-1940 7.0% 0.58%
1941-1942 7.5% 0.62%
1943 or later 8.0% 0.67%

If you like your job, working a little longer might even be good for your golden years.

"There's more and more being written about how longevity is really extended by having some purpose, a sense you're doing something that really matters to you," Amrein says.

But at age 70, there's no further benefit in waiting. It's time to cash in.

Step 5. If you don't need it, figure out when you can best use it.

This is the best possible world. If your other retirement savings, through a pension, individual retirement account (IRA) or 401(k) plan, are healthy enough that you don't have to depend on Social Security, you have the luxury of making your decision based on other considerations.

Maybe you want to take the money early in your retirement, when you're at your most active, spending it on travel or that fancy RV you've had your eye on. If that's the case, and you're not worried about future income, why wait?

On the other hand, if you're worried your other sources of retirement income could fall short years down the road, then waiting to collect benefits (but not beyond 70) will help you sleep better at night.

If you're uncertain where you stand, Amrein suggests working backward from expenses.

Start with a careful inventory of the living costs you'll have when retired, along with a conservative estimate of your income from other sources. Make sure essentials are covered first, then look at the things you'd really like to do and see how they fit into the budget.

You'll have a much better sense of when you want to turn to Social Security.

Step 6. Apply with Uncle Sam.

Once you've decided the time is right, applying is pretty simple. You can do it over the phone or online. The government says it can take as little as 15 minutes.

You can also go into a local SSA office, although you should call first to set up an appointment.

You may be asked to provide certain documents to prove your eligibility, including your Social Security card, your birth certificate, proof of U.S. citizenship if you weren't born in the U.S. and a W-2 or tax return for the last year.

But overall, the process shouldn't be difficult. All new beneficiaries now receive their payments electronically, so have your bank account information handy to set up an automatic deposit.

If you don't have a bank account, the government can arrange for you to receive your payments through a special Direct Express card, which functions like a bank cash card.