If you want to know the best age to claim Social Security benefits, there's only one thing you need to predict: your life expectancy. As morbid as it may be, if you know exactly when you'll pass away, you can determine the exact month you should claim benefits to maximize your lifetime income from the government program.
But accurately making such a prediction is hard.
The next-best thing you can do is to use statistics, which can provide an expected value of a decision like when to claim Social Security. Maximizing the expected value is a great starting point to base your decision on, but it shouldn't be the only factor.
Here's what the statistics say is the best age to claim Social Security.
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Diving into the data
The Social Security Trustees produce a report on the health of the government program every year. One key piece of data the Trustees use to determine the future of Social Security is a period life table. The period life table shows the projected mortality experienced within a given year based on age and sex.
The Social Security Administration publishes those tables for everyone to see. You can use that data to better understand the projected life expectancy of men and women and help determine the best age to claim Social Security.
Most people first become eligible to claim Social Security retirement benefits starting at age 62. While it makes sense to plan ahead, you won't have to finalize your decision until 62 at the earliest.
From the data, you can see the expected lifespan of a man turning 62 in 2024 is approximately 21.5 years. A woman turning 62 this year can expect to live another 24.5 years on average. Both will put an individual well into their 80s, surpassing the typical "breakeven age" for those who decide to delay until 70 to claim Social Security.
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But a dollar in the distant future isn't worth the same as a dollar today. There's an opportunity cost to delaying benefits, and that shouldn't go unaccounted for. Since Social Security is an inflation-protected asset, the closest investable analog to delaying Social Security is TIPS. TIPS are government-backed inflation-protected bonds. Long-term TIPS currently yield about 2% (plus inflation adjustments), so you can discount future Social Security payments by 2% to get a better idea of whether delaying is worthwhile.
I built a model to discount the cash flows provided by Social Security based on that 2% while also factoring in someone's likelihood of collecting their benefits given the period life tables. The resulting numbers say the best claiming age for a man turning 62 this year is 68 years and four months, while a woman turning 62 this year should plan to wait until age 69 and four months. If you don't discount at all, the optimal age for both climbs to 70.
The best Social Security claiming age will climb higher over time
There are some important caveats to note in this model. These numbers are for just a single cohort of seniors. The actuaries at the Social Security Administration expect life expectancies to improve over time. As such, younger people should plan to claim even later than the ages above.
Additionally, the yield on TIPS can fluctuate based on the actions of the Federal Reserve . With most people expecting rate cuts in the near future, it might make sense to use a lower discount rate and err on the side of delaying longer to optimize cash flows.
In other words, the above ages are probably the earliest the average individual should consider taking Social Security benefits if they want to maximize their expected lifetime income from the program.
Important considerations and when to ignore the statistics
The above data only look at the impact of claiming age on individual Social Security beneficiaries. Things get a lot more complicated when you factor in the dynamics of a couple's claiming strategies, including spousal benefits and survivor benefits.
Thanks to survivor benefits, it typically makes sense for the higher-earning spouse to wait until age 70 to max out their benefits and the benefits of the surviving spouse. The lower-earning spouse planning to claim spousal benefits shouldn't delay past their full retirement age (when such benefits max out). In some instances, it might make sense for the lower-earning spouse to claim as early as possible at age 62.
Moreover, it's important to realize the above numbers are based on averages. If you're in above average health -- you don't smoke, you exercise, you have no major health issues, and you regularly see your doctor for checkups -- you can expect to live longer than average. As such, it makes sense to delay your benefits longer. On the other hand, if you're in poor health and have reason to expect your lifespan will fall below average, you should claim earlier.
The most important consideration for anyone deciding when to claim Social Security is their personal circumstances. If you can afford to delay your benefits until age 70, that may be the best age for you to claim. It provides extra insurance against living longer than expected. If you can't afford to go a day beyond 62 without supplemental income, then you should claim your benefits as soon as possible, regardless of what my model tells you.
Don't let statistics alone dictate your Social Security claiming strategy. Optimizing everything to the penny isn't necessarily going to provide you with the most secure retirement.
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