Why Your 'Break-Even Age' Might Be the Wrong Way to Decide When to Claim Social Security
The longer you wait to receive Social Security until your full retirement age, the larger your checks will be once you do start getting them. But is that worth delaying your benefits for, since you can start receiving them at age 62?
The age at which the total lifetime benefits you get from delaying your claim catch up to what you would have collected from claiming earlier is your break-even age. Some people lean heavily on this figure when deciding the right time to access benefits, but there are other important factors to consider.
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What break-even age means
The break-even age depends on when you start to receive Social Security benefits and your full retirement age. It’s typically in someone’s late 70s or early 80s.
People who aren’t sure if they will live until then can benefit from taking out Social Security shortly after they become eligible. For others, it may make sense to delay, since the money you’ll receive after the break-even age you wouldn’t have received if you started claiming earlier.
The Social Security Administration has tools on its website that can help you determine the best age to claim your benefits given your specific situation.
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Life rarely follows the spreadsheet
Life doesn’t always go as planned. Someone who took out Social Security at 62, assuming they wouldn’t make it to 80 because of health issues, could be in a financially worse position if they live longer than expected compared to if they had waited. On the other hand, if someone waits to claim Social Security until they turn 70, there’s no guarantee they will live until their break-even age.
That’s why the Social Security Administration says that there isn’t a single “best age” to claim benefits. Your family’s health history, your financial situation and your job’s demands are three key factors that introduce variability.
Delaying until 70 will maximize your benefits, which can outweigh the instant gratification of receiving checks starting at age 62. Higher cash flow in the future offers more financial flexibility to cover various expenses. However, some people have to claim early, as doing so can get them out of a financial pinch and reduce stress. Claiming Social Security can help people retire from physically demanding jobs and shift to more reasonable part-time work.
What to consider instead before claiming
Everyone’s situation is different, but there are common patterns and themes that can lead to the right decision for you. It’s advantageous to delay Social Security if you have the necessary savings and wages to keep up with living expenses. However, if those same wages require you to work at a job that is taking a toll on your health, claiming Social Security may be the right move. Consider that if you are still working while you claim Social Security, a portion of your check may be temporarily withheld — depending on your income — until you reach full retirement age.
A larger benefit in the future can reduce the risk of running out of money, but delaying can also boost a spouse's survivorship benefit should they outlive you. The survivorship benefit is either the surviving spouse’s current benefit or the deceased spouse’s benefit, depending on which amount is higher. That’s why higher-earning spouses often wait until 70 to take out Social Security, while lower-earning spouses claim earlier.