The Consumer Financial Protection Bureau has unveiled a new "Planning for Retirement" tool to help Americans determine how much money in Social Security benefits they're entitled to, depending on age.
About 45 million Americans are now 65 or older, with 10,000 baby boomers turning 65 every day.
But many people claim Social Security too early, the CFPB says, and as a result give up thousands of dollars a year.
Why? It's complicated.
Americans are eligible to claim Social Security without any reduction at "full retirement age." For those born after 1942, full retirement age ranges from 66 to 67, depending on the year they were born.
Yet "many Americans are collecting early despite living longer lives," said CFPB director Richard Cordray.
Nearly half of retirees start collecting benefits at 62, the earliest eligibility age. In 2013, nearly three-quarters of eligible recipients claimed benefits before reaching full retirement age.
Americans now stretch payments over a longer period, since those age 65 today will live, on average, to 85 and perhaps even older, Cordray added.
Then there's the knowledge gap: Only 22 percent of Americans know what their full retirement age under Social Security is. Only 12 percent knew how their benefits would change if they claimed before, at, or after that age, the CFPB found.
The new tool is available online at www.consumerfinance.gov/retirement/before-you-claim.
Plug in your date of birth and highest annual work income to estimate Social Security benefits.
For instance, a 45-year-old could retire at 67, but if he or she waited until 70, the Social Security benefit could rise from $2,793 to $3,463 a month.
The tool also highlights claiming options depending on marital status, other income, working longer, and personal longevity.
Waiting to claim after age 66 can mean 8 percent higher benefits each year you delay until age 70, according to American College in Bryn Mawr.
Some Social Security loopholes are closing. One strategy to maximize higher benefits known as "file and suspend" goes away as of April 30. So the next six months are decision time, financial planners say.
"If you're turning 66 in the next six months, consider taking advantage of 'file and suspend' strategies," says Ed Doran, a tax director with accounting firm Isdaner & Co., in Bala Cynwyd.
It works this way: If you're married, you file for Social Security and trigger your spouse's right to begin benefits, as well.
"That option permitted someone to file for benefits at her full retirement age" and then immediately suspend them so her spouse could get the full spousal benefits under her name, says Olivia Mitchell, director of the Boettner Center for Pensions and Retirement Research at the University of Pennsylvania's Wharton School.
The person could then wait to file until age 70, at which time her own Social Security benefits would be as high as possible.
If you "file and suspend," only one half of the married couple can apply for retirement benefits and have the payments suspended.
The "suspend" part means you will not immediately receive your worker's benefit; it will be deferred until you choose to claim.
Deferral credits can increase your Social Security retirement benefits by up to 8 percent a year after full retirement age up until you turn 70.
Through April 30, anyone 66 or older can still file and suspend to allow an eligible spouse or dependent to collect a benefit off their record under the old rules. But after April 30, "file and suspend" ends for good.
Who should file early?
If one spouse is in poor health, filing for Social Security before reaching full retirement age could be wise, says Bill Van Sant, senior vice president of Univest Investments in Souderton.
And uncertainty about the fate of Social Security itself can be a factor.
"We never know our end date. Still, a lot of clients file early based on thinking that [Social Security] is going away," Van Sant says. "When you file early, you're giving up money."
Talk to a financial planner or a tax adviser, or call Social Security directly at 1-800-772-1213 (TTY 1-800-325-0778) to discuss whether to file and suspend in the next six months.
Or visit your local Social Security office if you have questions.