When To Take Social Security Benefits

Timing matters in retirement. The decision of when to take Social Security can be a complicated one, given that you can start anytime between ages 62 and 70. The good news is that, by being a little thoughtful, you can zero in on the strategy that fits best for you.

When To Take Social Security

Your “Full Retirement Age” (or FRA) is the age at which you are entitled to your full Social Security benefits. Of course, this is an unnecessarily complicated government program, so your FRA depends on the year in which you were born. To determine your FRA, click here.

The earliest you can claim Social Security benefits is at age 62. However, if you claim Social Security benefits before your Full Retirement Age, the amount of your benefit is reduced. The Social Security Administration (SSA) considers these “early” benefits.

If you wait until after your FRA to start Social Security, you are entitled to delayed benefits. Your monthly payment will increase 8% for every year you delay up to age 70.

The decrease or increase in your monthly payment is permanent, so this decision sets the baseline number you will receive for the rest of your life.

Let’s take a look at how this would work for someone who is turning 62 this year (2021) and is facing the decision on when to take Social Security. That would mean they were born in 1959 – and therefore their Full Retirement Age is 66 and 10 months.

To use round numbers, we’ll assume this retiree’s benefit at Full Retirement Age is $2,000 per month. Here’s how the options would look:

  • Age 62 (minimum reduced benefit): $1,416 per month
  • Age 66 & 10 months (FRA): $2,000 per month
  • Age 70 (maximum delayed benefit): $2,506 per month

As you can see, early benefits are less than full benefits and late benefits are more than full benefits. Of course, all of this makes sense in order to make it fair for everyone.

Knowing Your Estimated Benefits

To find an estimate of your benefits based on your employment history, go to the SSA Retirement Benefits Estimator. You’ll need to create an account and verify your identity to access your full employment history and your estimated benefits.

From there, you can use the Benefits Calculator, which lets you choose any retirement date and gives you the percentage your benefits will increase or decrease. You can multiply that percentage by your estimated benefits to find out the impact of retiring early or late.

Is Your Breakeven Age Important?

By delaying your benefits, you’ll receive larger monthly payments. However, you’ll receive fewer of them. That’s why some people like to look at a “breakeven” analysis in making their decision on when to take Social Security.

The timing of Social Security is essentially the choice between retiring early and getting less per month or retiring later and getting more. Depending on how long you live, the larger monthly payments may result in more total benefits. However, those who file for benefits early get a “head start”, so we need to factor that in.

The age at which the total amount of your delayed benefits catches up with the total amount of early benefits is the breakeven age.

Let’s revisit the example of the retiree we discussed earlier. If our retiree chooses to start receiving benefits at age 62, he or she would receive a total of $80,712 in the four years and 9 months before Full Retirement Age.

The number of years to break even – meaning the age at which the greater monthly benefit finally makes up for that initial $80,712 in payments for retiring early – is age 78 for full retirement and age 80 for late retirement. After those ages, the benefits of delaying retirement outweigh those of retiring early.

Factoring In Life Expectancy

Naturally, after thinking about our breakeven age, life expectancy should be a consideration. According to the Social Security Administration, life expectancy for someone born in 1959 is 83.4 years (for males) and 86.2 years (for females). Health and family history, of course, make a difference.

From strictly a numbers standpoint, it’s beneficial to delay retirement for most people. One thing we have not yet discussed is the ongoing cost-of-living adjustments (COLA) that bump up your benefits over time in an effort to keep up with inflation. These adjustments have the effect of making the larger payments more beneficial later in life – assuming you live past the breakeven age.

A Lifestyle-Based Approach

Lifestyle factors will also play into your Social Security decision as much as a breakeven analysis or life expectancy. You may decide to delay your benefits because you plan to continue working; you may need a few more years of full salary to save for retirement. You may also want to keep your company health insurance plan until you’re at least 65 and qualify for Medicare.

For others, retiring as early as possible and spending time catching up with family is the driving decision. Some people may be ready to dedicate their time to a cause, hobby, or new business, while others may wish to fulfill travel goals while they’re still young and active.

The timing of your Social Security benefits is a personal decision with many moving parts – and it requires thoughtful, careful analysis. Working together, your financial advisor and you can map out a plan that incorporates your lifestyle and your goals and makes sound financial sense.

If you need help deciding when to take Social Security, then click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.

As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.


The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
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