If you're approaching retirement age and want to get the most out of Social Security, there's one thing you need to know: The longer you wait to receive benefits, the bigger they will be.

How much bigger? To illustrate this, I drew up the following chart, which compares the difference between applying for benefits at three different ages.

  • The first is at age 62, when you're first eligible to apply.
  • The second is at 66, when you reach "full retirement age" and are thus eligible to receive your entire "primary insurance amount."
  • And the third is at 70, which includes "delayed retirement credits" and thereby boosts your monthly check.
social security benefitsSocial Security Administration

The difference between these points is dramatic. Assuming you were born between 1943 and 1954, your reward for waiting until age 66, as opposed to starting benefits at 62, is a 33% increase. And if you wait until turning 70, the payment goes up by 76%, or nearly double the original amount.

The reason is twofold. In the first case, retirees are effectively punished for receiving benefits early. The Social Security Administration does so by docking your primary insurance amount (what you're entitled to at 66) by five-ninths of 1% for every month you take benefits early up to 36 months and then five-twelfths of 1% for every month thereafter (currently up to 12 months -- though this begins to increase for people born after 1954).

Alternatively, in the second case, retirees are rewarded for waiting to receive benefits until after their full retirement age. If you choose this route, your monthly check increases by 8% for each full year that you defer, up to age 70. By waiting until then, in other words, your monthly Social Security check would increase by an impressive 32%.

So, is it worth it to wait? It depends. If you can financially afford to wait and are likely to live past age 77, then it would be in your interest to do so. Moreover, if you plan on living past 82, then it'd also be worth it to wait until turning 70, at which point your benefits are maximized. By contrast, if you can't afford to wait or aren't as optimistic about your longevity, then taking benefits early will almost certainly be a better option in your particular case.

This is a morbid and unfortunate subject, to be sure. And it's one that few people want to consider. But it's nevertheless critical that you do so. Remember, you've paid into the system for dozens of years. As a result, there's absolutely nothing wrong with wanting to maximize what you take out of it in return.

How to get even more income during retirement
