3 reasons claiming Social Security at 66 makes sense

The importance of Social Security can't be overstated. Each month, the Social Security Administration (SSA) sends checks to more than 62 million eligible beneficiaries, of which 42.7 million are retired workers. Of these seniors, 62% lean on Social Security to account for at least half their monthly income. Without Social Security, the senior poverty rate in this country would likely balloon.

The importance of your Social Security claiming decision

Because Social Security income is so consequential to current and future retirees, it can be rightly said that your claiming decision is of the utmost importance. Of the four factors that determine your monthly payout -- work history, earnings history, birth year, and claiming age -- that last one is the biggest wild card of the bunch.

Best places to live on a Social Security check
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Best places to live on a Social Security check


Springfield, located in the southwest corner of Missouri, is among the most affordable cities to live when you have $0 saved for retirement. According to Numbeo's Cost of Living Index for 2017, the rent in Springfield is less than 19 percent of that in NYC while the general cost of living plus rent is 41.09 percent.

The average Social Security check each retiree receives here is $1,300.51. That's good news considering you can get a downtown one-bedroom apartment for around $507, or $450 elsewhere.

Best of all, Springfield is a lively town close to recreational areas. Springfield/Greene County has over 100 parks, including Lake Springfield Park, which is perfect for kayaking and canoeing. And you'll find lots of bike paths in and around town as well as lakes and streams popular with fishermen. 

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When you're trying to make the most of your Social Security check, look no further than Athens. The city of some 200,000 residents has a cost of living that is 6.2 percent below that of the national average, according to Forbes. Your cost to rent in Athens is less than one-quarter than what you would pay in NYC and, when you factor in groceries, transportation, restaurants and other day-to-day expenses, you'll live in Athens for just 43.88 percent of what you'd pay in the Big Apple.

Since the town is the home turf of the University of Georgia, you'll find lots of low-cost eateries as well as cultural activities. The art and music venues are impressive. Athens is also known for its annual bicycle races called the Twilight Series.

So, how much does a one-bedroom apartment cost in Athens? Count on paying a little over $700 for a downtown apartment and around $600 elsewhere. Considering the average monthly Social Security retirement check in Georgia is $1,304.44, you'll have plenty of cash leftover after bills.

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If you prefer year-round warm weather, consider Tucson, a large city in Arizona's Sonoran Desert. Tucson's cost of living is delightfully low, with rent prices less than a quarter of NYC rent. You can find a one-bedroom apartment for $578 if you don't want to be downtown — $686 if you do.

When you include rent, groceries and other living expenses, a Tucson resident spends only 45.17 percent of the amount spent by NYC dwellers. And, the typical Social Security retirement check here is above the national average, at $1,343.51.

Over half a million people live in Tucson, and the city continues to grow. The downtown is compact, with a small historic district. Nearby you'll find the University of Arizona. Tucson is an attractive city surrounded by several high, forested mountain ranges, including the Santa Catalina Mountains.

See: Here's What an Average Apartment Costs in 50 U.S. Cities 

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Mobile is another city with a cost of living significantly lower than the U.S. average. Move here for retirement and you'll pay just 24.27 percent of NYC rental prices. That means you can get a one-bedroom apartment for between $600 and $650 just about anywhere you live in Mobile.

Once you include food, transportation and other expenses, you'll be paying less than half — 46.28 percent — of NYC prices. But, average Social Security checks are a little lower than what'd you expect, at $1,285.68.

Mobile is located on the Gulf Coast and has a rich history as an antebellum seaport. Today, it remains a major port and is sometimes compared to New Orleans — except a little more laid back.

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Rent in Shreveport comes in at a monthly cost between $700 and $740, depending on your proximity to the city center.

Unfortunately, the average Social Security benefit in Louisiana is just $1,212.05, the lowest of any state, according to a GOBankingRates study on the best and worst states to retire rich.

Still, your cost to live in Louisiana is just 47.08 percent of that in NYC. Meanwhile, Shreveport is a cultural hub in the tri-state area of Arkansas, Louisiana and Texas.

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Billed as "The Biggest Little City in the World," Reno living comes with a lot perks, most notably a cost of living that's less than 50 percent of NYC. Rent alone is just 31.04 percent the cost of NYC dwellings. Surprisingly, it's more expensive living outside of the downtown area. You'll pay around $750 for a one-bedroom apartment in the city center, but closer to $813 outside of it.

Reno's average Social Security check is $1,313.43, and you'll have plenty to do with your leftover money. Truckee River provides access to rafting, kayaking and fishing. There's also tons of festivals happening in Reno at any point in time, like the Reno River Festival and Artown Festival.

Be Prepared: 5 Social Security Changes to Watch for in 2017 

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Albuquerque is New Mexico's largest city, and it's one of the cheapest places to live. Its cost of living is similar to Shreveport, with rent near the city center at about $760, or about $640 outside the city.

In 2016, U.S. News & World Report named Albuquerque one of the 50 best places to live in America. It described this desert city's appeal as "a blend of modern times and Native American history." Albuquerque has a diverse population and is perhaps best known for its annual International Balloon Fiesta.

You'll also enjoy Old Town, where you'll find numerous restaurants, museums and galleries. One downside for retirees: The average Social Security retirement check received by folks living in Albuquerque is $1,227.11. So, be prepared when your check arrives

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In a rating of the top states for businesses in 2016, CNBC named Oklahoma the sixth-best state for cost of living. Oklahoma City, the state's largest city, has rent costs between $625 and $850. Between rent, groceries and utilities, you can expect to spend just 47.93 percent what you'd spend in NYC, a comparable amount to living in Reno or Mobile.

Average Social Security benefits come in at $1,277.14 — not the best, but also not the worst.

While you may not think of Oklahoma City as offering a stunning cityscape, National Geographic named it a must-see location in 2015. It gave shout outs to its community boathouse, new West River Trail and rebuilt MidTown.

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Rent is low in Fort Wayne, about 22.73 percent of what you might pay in NYC. Retirees in this city can find a one-bedroom apartment for around $631, making it an affordable place to live. In fact, the cost of living in Indiana is an estimated 16 percent lower than the national average, according to data from AreaVibes. And Niche, which ranks and review neighborhoods, named Fort Wayne the cheapest city to live relative to income.

Average Social Security retirement benefits are a healthy $1,379.93. Once there, you'll enjoy the Foellinger-Freimann Botanical Conservatory, historical museums and the Black Pine Animal Sanctuary, among other attractions.

Up Next: 20 Unsettling Things You Need to Know About Social Security 

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For those who may be unfamiliar with the ins and outs of Social Security, here's a very quick lesson. Aside from the SSA taking into account your 35 highest-earning, inflation-adjusted working years, as well as using your birth year as a guide for figuring out your full retirement age, it'll rely on your claiming age to determine how much you'll receive each month. And the longer you wait to enroll for benefits, the more you'll eventually be paid each month. Your benefits grow by approximately 8% per year, beginning at age 62, and ending at 70. They even accrue on a monthly basis, meaning that waiting even one, three, or six months can incrementally boost your payout.

Now, everything is relative to your aforementioned full retirement age -- the age at which you'll receive 100% of your payout. For most of today's claimants, their full retirement age falls between 66 and 67. Claim benefits at any point before reaching full retirement age and you'll accept a permanently reduced monthly payout. Wait until after your full retirement age to enroll and you can actually receive more than the full payout at your retirement age.

Claiming benefits at age 66 might be your best option

You might be thinking the smartest thing to do is wait until after your full retirement age to claim benefits in order to maximize what you'll be paid each month. This, however, isn't always the best strategy. For example, if you have a chronic health problem, waiting to file for benefits until age 70 might not be smart -- it won't help you maximize what you'll receive from Social Security over your lifetime.

Similarly, claiming too early isn't necessarily the right move, either. While it will make sense for some people, the permanent reduction in your monthly payout can sting over the long run.

Instead, claiming at age 66 might just be the smartest thing you can do. Here are three reasons:

1. You'll be taking into account increased longevity

Claiming at age 66 helps take into account our lengthening life expectancies. Even with increases in life expectancy in the U.S. having stalled somewhat in recent years, it's grown by approximately nine years since 1960. According to the SSA, the average 65-year-old today is set to live about 20 more years. If you claim early, you could be accepting up to a 25% to 30% permanent reduction in your payout. Meanwhile, at age 66, you'd be paid right around 100% of your retirement benefit.

I know you're probably thinking the following: "If the average 65-year-old lives another 20 years, why not wait till age 70 to claim benefits and maximize your monthly payout?" The answer is simple: We don't know our own expiration date. Guessing when to claim benefits based on our health is a total crapshoot, so splitting the difference down the middle at age 66, assuming you're in good or excellent health, is probably going to work out well.

2. It's a smart move to protect your loved ones

An often overlooked aspect of the claiming decision is that it may not be totally about you. If you have a spouse or young children, their eventual payout could depend on your claiming decision.

Today, around 6 million beneficiaries receive survivor benefits as a result of an eligible worker passing away. These beneficiaries tend to be the widows, widowers, or children of the deceased. If the survivor benefit -- which is based on the work history, earnings history, and claiming age of the deceased worker -- is higher than the benefit a spouse would have received from his or her own work and earnings history, then the survivor benefit is chosen.

However, claiming earlier than full retirement age can reduce the survivor benefit that your spouse and/or children receive. If you are the household breadwinner, waiting until age 66 (or your full retirement age) is a smart way to provide a financial foundation for your survivors.

3. It provides some insurance against potential benefit cuts in the future

Waiting until age 66 to file for benefits might be a good way to provide some insurance in case Congress fails the American public and benefit cuts occur within the next two decades as a result.

Without getting into too much depth here, Social Security is in trouble. It's facing a $12.5 trillion cash shortfall between 2034 and 2091, and it either needs new revenue to be generated or expenditures to be cut in order to continue making payments. The Social Security Board of Trustees has predicted that the trust will completely exhaust its asset reserves by 2034. If no new revenue is generated, an across-the-board cut to benefits of 23% may be needed to sustain solvency.

Should you choose to claim at age 62, you'll maximize the number of years between now and 2034 during which you won't have a 23% cut in your benefits. Of course, you'll also be accepting between a 25% and 30% permanent reduction in your monthly payout from full retirement age, as well as setting yourself up for a further 23% cut in 2034 (per estimates). Waiting until age 70 will max out your monthly stipend, but it also reduces your earning potential by the eight years you have to wait to get there. By claiming at age 66, you'll be giving up only four years of earning potential, and you'll wind up receiving around 100% of your payout, depending on birth year. Thus, even with a possible 23% cut on the horizon (which by no means is negligible), retirees would still be in pretty decent shape.

As always, your claiming age is a personal decision that can't be pigeonholed into a single scenario. Yet, claiming at age 66 does offer quite a few benefits that you might have otherwise overlooked.

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