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Is Break-Even Age the Key to Your Best Social Security Claiming Strategy?

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What’s the best Social Security claiming strategy? Ask any group of boomers about their preferred Social Security claiming strategy and the odds are you’ll get a wide range of answers. Some argue vehemently that you should start taking benefits the day you turn 62, in order to get every dime that you have coming before (some believe) the program runs out of money (which is something the experts say won’t happen).

Others hold to a Social Security claiming strategy that says waiting until 70 when benefits max out is the only sensible plan, even though only about 4 percent of beneficiaries actually wait that long. For many others, the answer lies somewhere in between.

There are plenty of tools online to help you decide what’s best for you. But one helpful thought process suggested by some is to determine your break-even age – that point where the money you’ll earn from Social Security by waiting exceeds the money you’ll earn by taking early benefits. If you expect to live past your break-even age, you’re generally better off waiting.

To help explain this concept, we turn to an article we first featured one year ago from US News in which reporter Rachel Hartman provides some suggested ways to figure out your own break-even age, as a means of helping you make an informed benefit decision.

Before diving into the article, we also want to strongly encourage you to talk to a financial planner and work with him or her to develop a financial dashboard. It’s a superb tool that will help you make an informed decision about your ideal strategy for saving, spending, and investing. Contact us and we’ll gladly refer you to a trusted financial professional.

Social Security Claiming Strategy is a Big Decision

In her article, Hartman sets the stage. “As retirement nears,” she writes, “you may be wondering when to start taking Social Security payments. These benefits are primarily based on your earnings during your working years and your age when you start receiving benefits.” She adds the explanation that benefits can start as early as age 62, but if you do that your checks will be permanently reduced. Monthly benefits gradually increase for each month you wait, maxing out at age 70.

This is where the break-even age comes into play. “Though your monthly benefit amount will be higher if you start collecting benefits at an older age, it will take a while to receive the same total amount you would have received by starting earlier,” Hartman explains. “Your break-even age is the point when drawing your payments later begins to exceed the value of starting payments early.”

Florida-based Social Security strategist Chuck Czajka calls the break-even point “the most common indicator people use to determine when to collect benefits.”

As Hartman writes, you need to think through several factors when considering the best time to begin Social Security. These can include your personal and family medical history, your spouse’s projected benefits, your own desire to keep working, plus the other income streams you can rely on in retirement.

Social Security Claiming Strategy and Your Break-Even Age

As stated above, when you start Social Security payments early, your payment is lower but you’ll theoretically be collecting those payments over a longer period of time. “Collecting Social Security later will result in a larger monthly benefit, but it will take some time to receive as much total income as you get by starting early,” says US News. So, the break-even age is the age at which you theoretically come out ahead by waiting to start Social Security benefits.

The tricky part comes down to determining your projected life span – or, as Hartman writes, “Which strategy produces a higher lifetime benefit ultimately depends on how long you live.”

You can use an online Social Security calculator (such as this one from AARP) to calculate your break-even age. Most financial advisors can also determine your break-even age based on your income, age and scale of expected benefits. For those who prefer old-fashioned methods, an Excel spreadsheet lets you plug in various starting ages using benefit levels found in your my Social Security account.

A Few Sample Scenarios Prove the Point

The US News article provides some sample scenarios that help clarify the significance of your break-even age. “For instance,” says the article, “perhaps your full retirement age is 67, at which time you qualify for $2,000 a month.” Starting benefits at age 62 results in a 32 percent reduction in monthly payments. “You will receive $600 less a month if you start payments at age 62, and your monthly benefit will be reduced to $1,400 per month.” (Like all Social Security benefits, that amount will rise over time due to cost-of-living increases.)

But delaying taking benefits pays off. “By waiting until your full retirement age, you’ll receive $2,000 a month,” the article explains. “After that, every additional year you wait you will get an 8 percent increase until age 70. If you wait until 70 to begin Social Security, your benefit would increase to $2,480 each month.”

If you expect to live to the not-uncommon age of 90, that benefit you began at age 62 will net you about $470,000 in lifetime benefits. But by waiting just 5 years, to full retirement age of 67, that net income figure jumps to $552,000 by age 90. The 90-year-old who waited until age 70 to start benefits will have brought in about $595,000!

In this illustration, one expert told US News, the break-even age between starting benefits at age 62 and age 67 is about 80 years old. A beneficiary who lives past 80 is better off waiting, while someone who passes away before then would have done better claiming early benefits.

Not Everyone Agrees About Importance of Break-Even Age

The support for basing claiming strategy on break-even age is hardly universal. Just this week here at the Blog, we came across this CNBC article that listed over-emphasis on this imaginary milestone as one of several “Social Security myths.”

“By focusing on that measure, you may not consider other important factors, such as how your spouse or dependents may also get the most benefits,” said the CNBC analysis. Harvard-based planning guru Laurence Kotlikoff offers a Social Security calculator on his website (for a fee) which, says CNBC, “includes the break-even age because of the demand for it, he said. At the same time, there’s also a warning not to consider it.”

The concern expressed by these “break-even age skeptics” is that focusing too much on a number that’s impossible to know with certainty may tempt beneficiaries to claim early. “Life expectancy is an imprecise date because no one dies on time,” says the CNBC article.

There Are Other Factors That Could Influence Your Decision

Even the US News article seems to hedge its bets. “While break-even calculations can be helpful, there are other factors to consider,” Hartman acknowledges. As Virginia-based financial planner Taylor Jessee told Hartman, “If everyone knew how long they’d live, timing Social Security would be a piece of cake.”

In fact, the article explains, the Social Security claiming decision is often more nuanced. The US News report lists these other factors to consider:

  • Your personal and family medical history. “If longevity has existed in past generations, you might expect to live longer,” says the article. But those in poor health should consider earlier benefits.
  • Your spouse’s benefits. “If you’re married, you’ll want to think about the benefits you and your spouse will receive,” the article advises, and we strongly agree. When a spouse passes, the survivor receives the higher of the two benefits – either yours or your spouse’s. The impact of taking early benefits can permanently affect your spouse’s future income, which is generally an argument in favor of waiting.
  • Your desire to work. As this related article explains, those who take early benefits but keep on working can see their benefits further reduced. The formula sounds confusing, but people who are drawing benefits before full retirement age and earning over $19,560 annually (the 2022 limit) will see a temporary benefit reduction of $1 for every $2 they earn over that amount. “When you reach your full retirement age,” says Hartman, “you can earn an unlimited amount without having your benefit temporarily reduced.”
  • Other income streams. What other sources of income will you have in retirement? “You might have a 401(k) or other accounts that will support you at the beginning of retirement and allow you to wait until later to receive Social Security,” says the article. “If funds are tight or you don’t have other savings, you might opt to begin payments early.”

As we stated at the outset, our strong view is that you need professional advice from an objective planner in order to decide on the best course of action regarding Social Security. We will happily provide referrals to you if you’ll just give us a call.

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(originally reported at

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