Most retirement experts tell people to wait as long as possible before applying for Social Security benefits. Is this good advice?

1. SOCIAL
SECURITY
Should you apply
for benefits at 62?

2. When most people approach retirement
age, they’re encouraged to wait as long
as possible before applying for Social
Security benefits.

3. But is this good advice?

4. That depends…

5. The rationale for waiting is that the size of
your monthly benefits is related to the age
you begin receiving them.

6. If you apply at the earliest possible time
– age 62 – then your benefits will be 25%
less than if you wait until full retirement
at age 66.

7. Alternatively, if you wait until turning 70, your
monthly check will be 32% larger than at 66.

8. 75%
80%
87%
93%
100%
108%
116%
124%
132%
62 63 64 65 66 67 68 69 70
Social Security Benefits by Retirement Age
Percent of Primary Insurance Amount

9. While this presents a strong case
for waiting, it’s important to keep
something in mind…

10. By applying for benefits early, you’ll receive
more checks than if you choose to wait.

11. If you apply at 62, for example, you’ll
receive monthly checks for four years
longer than someone who applies at 66.

12. To determine when to take benefits, in
turn, you have to balance the value of
receiving smaller checks for more
months versus larger checks for fewer
months.

13. This is known as a breakeven analysis.

14. Seems
complicated,
right?

15. Well, it turns out that it’s actually pretty
straightforward.

16. Because the penalty for taking benefits early
is the same for everyone, the breakeven point
is the same as well!

17. Based on a claiming age of 62 versus a
full retirement age of 66, the threshold
is 77 years old.

18. -$100,000
-$80,000
-$60,000
-$40,000
-$20,000
$0
$20,000
$40,000
$60,000
62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98
AGE
Cumulative Surplus (Deficit) in Lifetime Benefits
Based on a Claiming Age of 62 as Opposed to 66

19. Thus, the question of whether to take benefits at 62
versus waiting until full retirement at 66 turns in
part on whether you’ll live past 77.

20. So, will you?

21. While that’s impossible to predict, we
know two things.

22. The first is that the average life expectancy in
the United States is 76.4 years for males and
81.2 years for females.

23. And we also know that if you’ve already
made it to age 65, then your life
expectancy increases to 84.3 years for
males and 86.6 years for females.

24. So, again, this
seems to support
waiting to take
benefits as opposed
to taking them
early.

25. But here’s the thing…

26. If all you care about is maximizing your
lifetime benefits, then when you take
them matters less than this math
implies.

27. As a recent government report explains:
"The Social Security benefit formula adjusts
monthly payments so that someone living to
living to average life expectancy should receive
receive about the same amount of benefits
benefits over their lifetime regardless of which
of which age they claim."

28. So there you have it…

29. All else equal, the decision of when to take
benefits is less about an impersonal
breakeven analysis and more about when you
want or need to take them.

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