It’s easy to oversimplify Social Security benefits and think it’s a matter of
choosing between “claim early” vs. “wait.” The reality is that it’s more nuanced
than that, and a very specific number can be the key to figuring it out.
There’s a specific break-even math to be aware of based on reduced senior benefits
and delayed credits, and this math could net you thousands more dollars over a
lifetime. We break down how each factor fits into your ideal retirement plan,
and what math you should do before you commit to one.
The choice most people try to make
Zoom out to the big picture, and you’ll often see one emotional decision at age
62. Yes, you’re eligible for Social Security benefits, but do you take the money
now? You’re tempted to lock in a check right away, as you’ve been working toward
it for decades.
Claim early and get smaller lifetime checks, but for more total years. Wait and
get a larger check later. This seems like a choice based on “check amount x
years”, but there’s some hidden math to help you calculate the right answer.
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The penalty for claiming at 62
Yes, you can start retirement benefits as early as 62, but that’s before your
full retirement age (FRA), which ranges from 66 to 67 depending on your birth
year. Claiming now reduces your monthly benefit by up to 30% compared to waiting
until FRA.
This is a permanent reduction that stays with you for life. It also affects the
cost-of-living increases (COLA) moving forward. Since COLA is based on a
percentage of your benefit, larger benefits get more actual dollars added with
each COLA. It’s proportional.
Why waiting can give you a big boost
There’s an upside to delaying, and it’s in the form of delayed retirement
credits. At FRA, you get 100% of your primary insurance amount (PIA), which is a
fancy way of saying “your full retirement benefit.”
If you wait even longer, Social Security increases your benefit by about 8% per
year for every year you postpone. This credit stops accumulating at age 70. By
age 70, you could see 124% of the full amount if your FRA is 67. This is the
structural increase of Social Security and doesn’t include COLA, which increases
as well.
How to win with the break-even age
Remember those thousands of dollars we suggested you may be leaving on the
table? There’s math involved that you may not have done before. The break-even
age is when the total dollars from waiting finally surpasses the total you’d get
by claiming earlier. You’re betting on more, smaller checks versus fewer, larger
checks to see at what point those realities converge.
Experts estimate that, when claiming at age 67 vs. 62, you’ll break even around age 78
to 80. Real break-even ages depend on each person’s exact benefit amounts and
assumptions about COLA and life expectancy.
How to do the break-even math
Get the monthly benefit amounts for age 62 and a later age of FRA or even 70.
Multiply the earlier benefit by the number of months you’ll be delaying.
Divide that “missed” amount by the monthly dollar difference between the two benefits to find out how many
months of higher benefits you need to break even.
The later you expect to live past break-even, the more sense waiting can make.
Just be sure to use numbers from your own Social Security statement, found
online. Don’t guestimate or use generic charts.
Personal factors to consider
Non-math factors also count and include the following:
- Health and family longevity: Claiming
earlier may make more sense when you may not reach beyond the break-even age. - Financial needs: Waiting from 62 to 70 assumes you have other income from
work, savings, or pensions to cover expenses. - Marital status and survivor benefits: Many couples can wait for the higher
earner to delay, which creates a larger survivor benefit for the other spouse if
the higher earner passes first. - Earnings test if you keep working: Claiming benefits before the FRA while
still working can cause some of your benefits to be temporarily withheld. Check
the annual limits, because these withholdings are credited back later,
but can affect cash flow in the meantime.
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Bottom line
If there’s a takeaway here, it’s not to follow generic advice or go with your
gut when deciding retirement age. Yes, it does include some non-math factors,
like your family’s health history or how much debt you need to pay off. If you
have a hard time talking through these realities, a financial professional can
be a neutral third-party guide.
The decision is also largely number-dependent, with break-even age a major
contributor to making the right choice. Once you begin receiving benefits, your
base check is generally set, although limited options to withdraw an application
or voluntarily suspend benefits may apply. The stakes can be a life-changing
amount that makes or breaks your retirement
plan.
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Author Details
Chris Lewis, CEPF
Chris Lewis has spent his career turning data into answers. As the Head of Research at FinanceBuzz and a Certified Educator in Personal Finance, he oversees the data journalism and media relations teams, digging into the personal finance topics that shape Americans’ lives at every stage, from Social Security and retirement income to 401(k) strategies, jobs, and real estate.
