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Social Security Break-Even Age

Deciding when to take Social Security retirement benefits is important because it can directly affect your benefit amount. While you can technically start taking benefits as early as 62, you’d receive them at a reduced amount. On the other hand, you could delay taking benefits up to age 70. Calculating your Social Security break-even age can help you decide when the best time is to begin taking benefits. You can do that using a Social Security break-even calculator. Additionally, it may be a good idea for you to consult with a financial advisor about when it’s best for your particular situation to begin receiving Social Security.

Defining the Social Security Break-Even Age

Your Social Security break-even age represents, in theory, the ideal point in time to apply for benefits in order to maximize them. Remember, you can begin taking your benefits at age 62 at a reduced amount. But by taking your benefits at this earlier age, you’ll receive more Social Security checks over your lifetime assuming you reach your desired life expectancy.

On the other hand, delaying your benefits past full retirement age increases them year over year until you reach age 70. Currently, the full retirement age for most people is either 66 or 67 years old, based on Social Security Administration guidelines. If you wait until age 70 to start claiming your benefits, you’d receive 132% of your regular monthly benefit amount. So the trade-off is receiving fewer checks from Social Security but the ones you do get would be larger.

Your break-even age is the point at which you’d come out ahead by delaying Social Security benefits. Your actual Social Security break-even age can depend on the number of benefits you’re eligible to receive, your tax situation and things like how inflation might affect the purchasing power of your benefits.

How a Social Security Break-Even Calculator Works

Figuring out the right time to start taking Social Security benefits isn’t always a straightforward process. A Social Security break-even calculator can help you get some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.

Social Security break-even calculators help you find the best age to start taking retirement benefits. They do this by comparing your cumulative Social Security retirement benefits paid at age 62, your full retirement age and at age 70 and estimating how long it would take the benefits paid at age 70 to break even with benefits paid to start at age 62.

Here’s a simple calculation to give you an idea of how a Social Security break-even calculator works. Say that you have the option to begin receiving $1,200 a month in benefits at age 62. You’d receive $1,700 in benefits if you wait until full retirement age at 66. Or you could receive $2,200 a month in benefits by delaying them until age 70.

The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount you’d receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits you’d receive if you started them at 62.

What a Social Security Break-Even Calculator Tells You

Social Security Break-Even Age

In a nutshell, a Social Security break-even calculator can tell you when the best age is to start taking Social security benefits, in terms of how much money you could expect to receive over time. Going back to the previous example, let’s assume that you track your benefit amounts over a 10-year, 20-year and 30-year period. Here’s how your total benefits received would look over each of those periods, for all three starting points.

Your cumulative benefits after 10 years:

  • $144,000, starting at age 62
  • $122,400, starting at age 66
  • $52,800, starting at age 70

Your cumulative benefits after 20 years:

  • $288,000, starting at age 62
  • $326,400, starting at age 66
  • $316,800, starting at age 70

Your cumulative benefits after 30 years:

  • $432,000, starting at age 62
  • $530,400, starting at age 66
  • $580,800, starting at age 70

You can see that you’d draw the most Social Security benefits in total if you wait until age 70 to start taking them, assuming you live to age 100. But that could be a big “if” when you’re not in the best health.

What you have to keep in mind when using a Social Security break-even calculator is that the numbers are hypothetical. They don’t take into things that could affect your ability to draw benefits or how far those benefits might go, such as:

  • Future cost of living adjustments to Social Security benefits
  • Your life expectancy and health status
  • How much tax you’ll owe, if anything, on those benefits
  • Changes to the inflation rate

These calculators also don’t factor in the number of benefits your surviving spouse might receive if you were to pass away.

Deciding When to Take Social Security Benefits

Typically, the longer you can wait to take your benefits, or the closer to 70 you are, the higher your allotment will be. However, that might not be the best solution for you and the result could change if you have 35 years of high income before then. A Social Security break-even calculator can be a good starting point for deciding when to take Social Security benefits. You can also use a Social Security benefits calculator to estimate how much you’ll receive at age 62, 66 or age 70.

Beyond that, however, consider the bigger picture and how things like changes to your health or rising inflation might affect your timing. Also, think about whether you plan to continue working in some capacity while receiving Social Security benefits. That could reduce your benefit amount, make some of your benefits taxable or both. If you earn income above certain thresholds your Social Security benefits could be reduced and you may owe income tax on them as well. That can shrink how far those benefits go in covering your expenses if you’re only semi-retired.

Also, consider other assets you can draw on for retirement income when trying to time Social Security benefits. If you have a 401(k) or pension at work, an individual retirement account, an annuity, a taxable brokerage account, savings accounts, certificates of deposit (CDs) or all of the above, those can also affect when you decide to take Social Security.

Bottom Line

A Social Security break-even calculator can be a helpful tool for Social Security planning, but it’s not the only one you can use to figure out when to take benefits. Keeping your estimated cost of living and expenses in mind, as well as your overall health and life expectancy can help you make the best decision about when to time taking your Social Security benefits. Once you start taking benefits then you can’t change the consequences.

Tips for Retirement

Social Security Break-Even Age

  • Consider talking to a financial advisor about when it makes the most sense to take Social Security benefits. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • A Social Security calculator can give you a good idea of what you will receive once you retire. Also, keep in mind that an annuity can give you a guaranteed income stream in retirement, which could allow you to delay taking Social Security benefits and therefore maximize your benefit.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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