Is Now the Time to Collect Social Security? 5 Green Lights to Watch For.

Social Security is big business, and crucial to many Americans, sending out more than $113 billion each month to more than 66 million beneficiaries.

The average total retirement benefit going to a retired couple age 62 or older was $2,952 as of June, providing about $35,400 in annual income. The average retirement benefit per person was recently $1,828 as of June, totaling around $22,000 on an annual basis.

It might not be as much as you'd want, but it can still make a difference between a financially precarious retirement or a manageable one.

Image source: Getty Images.

If you're wondering whether you can or should claim your benefits now, read on, to learn about five green lights.

1. Have you worked for at least 35 years?

Let's start with a simple qualification: Have you worked for at least 35 years? The formula that the Social Security Administration (SSA) uses to calculate your benefit is based on your earnings (adjusted for inflation) from the 35 years in which you earned the most. It's a good idea to visit the SSA website and set up a my Social Security account, so you can review its record of your earnings and verify that it's correct.

If you only have earnings for 30 years, five zeroes will be factored into the calculations, shrinking your benefit. So aim for at least 35 years. And if you work longer, the SSA will kick out your lowest-earning years, counting only the 35 highest-earning ones.

2. Are you 62 or older? Or 70 or older? 

Retirement benefits can be collected starting at age 62, but they will be smaller than what you would collect if you wait until your full retirement age (FRA), which is between 66 and 67 for most workers today. That's not necessarily bad, as you'll collect more checks by starting early.

If you delay starting to collect your benefits beyond your FRA, they will increase by about 8% for every year, until age 70. Beyond that, they won't increase, so you don't need to delay claiming beyond age 70.

The table below shows how much of your full benefits you'll collect based on your full retirement age and when you start collecting:

Source: Social Security Administration. 

So with a full retirement age of 67, if you delay until age 70, your benefits will be 24% bigger, meaning that a $2,000 benefit would become $2,480.

3. Do you need the money now?

This is an important question. If you really need that income as soon as possible, perhaps due to an unexpected early retirement, then claiming benefits early might be the right thing to do. (Claiming early is also often smart if you are not well and might live a shorter-than-average life.)

If you can delay, though, and especially if you stand a decent chance of living longer than average, it's generally smart to wait until age 70. Remember that benefits tend to be increased every year via cost-of-living adjustments, so the bigger benefit you start out with, the bigger increases you'll receive.

4. Have you coordinated Social Security plans with your spouse?

It's also important, if you're married, to have a coordinated Social Security strategy. Remember, for instance, that while you're both alive, each of you likely will be receiving monthly benefit checks.

But once one of you dies, the survivor is left with only one benefit check each month, and it's the larger of the two. So it can be worth it for the higher earner to delay collecting as long as possible (up to age 70) to maximize that benefit.

Then there are spousal benefits, for those with little to no earnings history. They give such spouses up to 50% of what the higher earner's benefit would be at FRA.

There are rules, though. For instance, the higher earner needs to have started receiving benefits in order for spousal benefits to be available.

5. Have you incorporated Social Security in your overall retirement plan?

Lastly, be sure to have a comprehensive retirement plan. You'll need to estimate how much income you're aiming for in retirement and then figure out how you'll get it: For example, perhaps you'll be investing a certain sum every quarter in a low-fee index fund for many years. (Index funds can be very powerful.)

You might want to time your various income streams, too. For instance, in order to be able to delay collecting Social Security benefits until age 70, you might need to draw more heavily from your retirement accounts for a few years.

Everyone's situation is different, so read up on Social Security in order to make smart decisions -- including the crucial decision of when to start the checks rolling.