What is the Social Security break-even age?

Of course, the average is just that — an average — and most people live either shorter or longer lives. That's where the break-even point comes in.

Calculating the cost of your decision

The break-even calculation is inexact; annual cost-of-living adjustments, and changes in your income if you’re still working, mean the amount of your monthly benefit can fluctuate even after you start collecting it. But you can still get a rough estimate of your break-even age.

Say you are closing in on 62 and considering your benefit options. You know, from checking your online My Social Security account or using AARP’s Social Security Calculator, that you are in line for an estimated $1,800 a month if you hold off claiming until your FRA of 67.

Starting at 62, your payment would be 30 percent less, or $1,260 per month. So, between the ages of 62 and 67, you would receive $75,600 in benefits ($1,260 for 60 months).

If you wait until you turn 67, you give up that initial $75,600 but would receive $540 more per month, or $6,480 more per year. At that rate, it would take about 140 months (11 years and eight months) to make up for the money you’d forgo by claiming benefits later. At around age 78 and 8 months, you reach the break-even point, when your cumulative benefits from claiming at 67 surpass those you’d get by taking retirement at 62.   

You can use a similar calculation to determine the break-even age for taking your maximum benefit at age 70 — in this example, approximately $2,230 a month.

Starting at 62, your benefits would come to $120,960 over the next eight years. Starting at 70, you’d get approximately $970 more a month, or about $11,640 more a year. It would take about 10.4 years to break even, so you’d be 80 and change when claiming your maximum monthly benefit begins to pay off in terms of total dollars.

Other factors to consider

When planning for retirement, however, there’s more to consider than just dollars and cents. You could pocket the most money in the long term by waiting to start your benefits, but only if you live past the break-even point.

That’s where other factors such as your physical condition and family situation come into play. Suppose you reach claiming age in poor health. Do you expect to live long enough to make up for the payments you’d forgo by delaying? On the other hand, is your spouse going to be depending on your benefits after you die? The tradeoff for starting your payments early could be lower survivor benefits for your mate.

Other income, or assets such as a pension or IRA, might affect your claiming decision. Perhaps you like your job and want to keep working well into your 60s, or you can afford to live on your savings while you delay Social Security and boost your eventual benefit. On the flip side, if you’re unable to work and need the money, collecting Social Security benefits early could help you make ends meet.

A financial adviser can help you weigh the pros and cons to determine what option works best for you.

Keep in mind

• You aren’t required to start collecting retirement benefits by age 70, but beyond that point there’s no benefit boost for delaying your claim.
• While Social Security is, for most people, a guaranteed financial resource later in life, it is not designed to fully replace work income. Retirement benefits typically amount to about 40 percent of a worker’s career average earnings.
• The AARP Retirement Calculator can help you develop a picture of your financial future, taking into account all sources of retirement income and estimating how much you’ll need to meet your needs.