When it comes to Social Security benefits, one of the biggest questions you should ask yourself is when to begin claiming them.
The earliest you can start claiming is age 62, but you'll receive a fairly significant reduction in benefits if you claim that early. The only way to receive the full amount you're entitled to is to claim at your full retirement age (FRA), which is 67 for those born in 1960 or later; for those born before 1960, it's either 66 or 66 and a few months depending on the exact year. And if you wait beyond your FRA to claim (up to 70), you'll receive a bonus on top of your full amount.
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Choosing the right age to claim is crucial because it will affect your benefits for the rest of your life. You do get one chance to change your mind after you claim, but you only have 12 months after claiming to reverse your decision, and you also have to repay all the benefits you've already received. So if you claim at the wrong time and wait too long to change your mind, you could be permanently stuck with your benefit amount.
Deciding when to claim isn't as simple as it may sound. There are several factors that affect when you should file, and one of the most crucial is your break-even age.
What is Social Security's break-even age?
Your break-even age is essentially when you'd come out ahead by waiting to claim rather than claiming early. When you claim before your FRA, you receive smaller checks, but more of them. Wait until later to claim, and you'll receiver fewer, bigger checks.
In theory, the system is designed so that you should receive the same lifetime amount regardless of when you claim. But it doesn't always work out that way, especially as retirees are living longer. If you only live until, say, 75, you're probably better off claiming early so you have more years to enjoy your money. But if you live to 100, you'll likely receive far more over a lifetime if you wait until age 70 to claim and receive those bigger checks.
To get a better picture of what the break-even age looks like, here's a hypothetical example. Say your FRA is age 67, and if you claim at that age, you'd be receiving $1,500 per month in benefits. If you were to claim early at 62, your benefits would be reduced by 30%, leaving you with $1,050 per month. Wait until age 70 to claim, and you'd receive an extra 24%, giving you a monthly total of $1,860. Here's what your lifetime benefits would look like depending on how long you live:
| Living To | Total Lifetime Benefits by Claiming at Age 62 | Total Lifetime Benefits by Claiming at Age 67 | Total Lifetime Benefits by Claiming at Age 70 |
|---|---|---|---|
| 62 | $0 | $0 | $0 |
| 67 | $63,000 | $0 | $0 |
| 70 | $100,800 | $54,000 | $0 |
| 75 | $163,800 | $144,000 | $116,600 |
| 80 | $226,800 | $234,000 | $223,200 |
| 85 | $289,800 | $324,000 | $334,800 |
| 90 | $352,800 | $414,000 | $446,400 |
Data source: Author's calculations.
In this scenario, your break-even age would be around age 85 because that's when the total lifetime benefits you'd receive by waiting until 70 to claim exceed what you'd receive by claiming earlier. If you don't expect to live that long, it's probably a better idea to claim earlier than age 70 to make the most of your money while you can.
Of course, nobody can predict how long they'll live. But consider your current health and your family history to get as accurate an estimate as you can. If you have reason to believe you won't spend several decades in retirement, you're probably better off claiming sooner rather than later. On the other hand, if you're in fantastic shape and your family members have a history of living into their 90s or beyond, you could receive thousands of dollars more in benefits over a lifetime by waiting to claim.
Other factors that influence the age you claim benefits
Calculating your break-even age will help you decide when is the ideal age to claim benefits so that you maximize your money, but it's not the only factor to consider.
Sometimes, you may be forced to claim earlier than you'd hoped because you need the money. Roughly 43% of retirees said they ended up retiring earlier than they'd planned, according to a report from the nonprofit Employee Benefit Research Institute, and most commonly this was a result of unexpected job loss or health issues. So you may not always get to choose your retirement age, and if you can't survive for several years on your personal savings alone, you may have to claim Social Security early to make ends meet.
It's also important to consider how much you'll rely on your benefits to cover all your retirement expenses. If you have little to nothing saved, Social Security will likely make up a significant portion of your income. In that case, waiting to claim so you can earn those bigger checks may be ideal just so you have enough cash to pay all your bills once you retire.
Regardless of when you choose to claim benefits, it's important to have some type of strategy before you file. Consider your life expectancy, when you expect to break even, as well as how badly you need the money in retirement. Then decide which age is optimal to begin claiming benefits. By going into your later years with a Social Security plan in place, you can maximize your benefits and improve your chances to enjoy a financially secure retirement.
