Ideally, retirement is one of the best times of someone's life. After decades of working, they can spend their time traveling, picking up new hobbies, spending extra time with family, or whatever their heart desires.
Despite how liberating retirement can be, it also comes with important decisions. One of those decisions is when to claim Social Security, which permanently affects your monthly benefit. Although your full retirement age (FRA) determines when you're eligible to receive your full benefit (called the primary insurance amount ), you can choose to claim sooner, reducing your monthly benefit, or delay past FRA to increase your benefit.
Your benefit will increase until age 70, and as enticing as a higher monthly check may be, it may not be the best choice for some people -- especially when considering the many months of missed payments you forego.
When you claim affects your monthly Social Security benefits
The value of your Social Security benefits revolve around when you claim them relative to your full retirement age. Your FRA depends on your birth year as you can see below:
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If you decide to start receiving Social Security benefits before your FRA, your monthly benefit will be reduced by five-ninths of 1% for each month you take it early, up to 36 months. Beyond 36 months, the rate of reduction changes to five-twelfths of 1% per month. For instance, if your FRA is 67, claiming benefits at 64 will result in a 20% reduction from your primary insurance amount, while starting at 62 (the earliest you can claim) will result in a 30% reduction.
Delaying past FRA is more straightforward. Each month you delay benefits will see them increase two-thirds of 1%, or 8% annually, until you turn 70. After age 70, benefits don't increase any further, so that should realistically be the latest anyone claims Social Security.
It all comes down to your break-even age and life expectancy
In Social Security, your break-even age is when the total lifetime benefits received from claiming at one particular age equals that of another age. Common comparisons happen between 62 versus 67 (most people's full retirement age), 62 versus 70, and 67 versus 70, though you can apply the concept to any other scenarios you're considering.
To see the break-even age in action, imagine you're debating whether to claim Social Security at age 62 or 70. At those ages, the maximum benefits are $2,710 and $4,873, respectively, so we'll use those as examples. Here are your cumulative benefits received at various ages:
| Monthly Benefit | Total by Age 75 | Total by Age 80 | Total by Age 81 |
|---|
| $2,710 | $422,760 | $585,360 | $617,880 |
| $4,873 | $292,380 | $584,760 | $643,236 |
Data source: Social Security Administration. Table by author.
If you compare claiming at 62 versus 70, the break-even age is slightly after 80. Before then, the total benefits you receive from claiming at 62 will be more than the total from claiming at 70, despite the larger benefit you get from waiting.
Putting your break-even age into perspective
Break-even age by itself is a helpful metric, but comparing it to life expectancies is what really puts things into perspective. Here are life expectancies at certain ages, according to the Social Security Administration:
| Age | Men's Life Expectancy | Women's Life Expectancy |
|---|
| 62 | 81.00 | 84.07 |
| 67 | 82.63 | 85.23 |
| 70 | 83.69 | 86.00 |
Data source: Social Security Administration. Table by author.
For many (especially men), the break-even age happens around life expectancy, suggesting the total benefits received might be similar regardless of when you claim. However, it's important to consider the many months of missed payments when delaying benefits.
Waiting to claim at 70 versus 62 would mean 96 months of missed payments, particularly at a time when you're likely to be healthier and more active. These might the years you can make the most of your retirement experience by participating in activities you love. The payments may be lower, but having that extra income could improve your overall quality of life during this period too. It will also provide stability for those who must rely more on Social Security for income and prevent them from having to scrape by while waiting for a bigger benefit.
While break-even age and life expectancy are important, they shouldn't be the only factors you consider when deciding when to claim benefits. Your personal and family health history, financial picture, and retirement goals should also be part of any final decision.
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