With retirement on the horizon, you have something important to consider: when to start claiming Social Security benefits. Claim too early, and you could miss out on a larger monthly payment. But wait too long, and you may not get as much out of your benefits as you could have—depending on factors like your health and longevity.
It's a balancing act, but finding your Social Security break-even point helps. This number tells you the ideal age to apply for benefits to get the most out of them—when the benefits of delaying Social Security outweigh the benefits of claiming early. Here's why it works and how to find your magic number.
What's the break-even point for Social Security?
Your Social Security break-even point is the age at which the total amount you've received in benefits by claiming early catches up to the total amount you would have received if you'd delayed claiming until a later age.
Imagine two scenarios:
You claim early and start receiving checks sooner. Each payment is smaller, but over time, the amount you receive grows.- You delay your benefits. Once you start claiming them, you'll receive a larger check, and that begins to accumulate.
When these two scenarios intersect, that's your break-even point—the total benefits received are roughly the same. That's typically somewhere between ages 78 and 81.
Why does the Social Security break-even point matter?
Knowing your break-even age can help guide your decision-making and planning around retirement.
- If you expect to live beyond your break-even age, delaying benefits may be a good fit because you'll receive more over your lifetime.
- However, if you have concerns you may not live past your break-even age, claiming early may make more sense, allowing you to enjoy your benefits sooner.
The break-even point isn't a one-size-fits-all solution, but it's a valuable tool that can help you weigh the pros and cons of claiming early versus delaying your benefits.
"Some people would rather be cumulatively ahead in the earlier years than cumulatively ahead in the later years," explains Eric Berg, an Advice Services consultant at Thrivent. "While I'd personally rather be ahead before age 80 than after age 80, if I think I'm going to live to 90 or 100, it still may be best for me to delay."
Why are Social Security benefits different at different ages?
Social Security benefits aren't a fixed amount. It's more of a sliding scale: The longer you wait to claim benefits, the more you'll receive monthly. Which, in turn, influences your break-even point. And it's all
FRA influences your break-even point. If you decide to claim Social Security early, you'll receive reduced benefits compared to your FRA amount. However, if you wait past your FRA, you'll receive an increased monthly benefit.
What's your FRA?
| Birth year | Full retirement age |
| 1943–1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 and later | 67 |
How FRA can affect your Social Security benefit
- Claiming before FRA. You can begin taking benefits as early as 62, but your monthly payment will be permanently reduced. You may receive more checks over your lifetime, but the amount is smaller.
- Claiming at your FRA. Claiming benefits at your full retirement age entitles you to your full benefit amount as calculated based on your earnings history.
- Delaying past your FRA. For every month you delay benefits past your FRA, up to age 70, you'll earn a larger monthly benefit. You'll receive fewer checks, but your lifetime payout may be higher.
Understanding
How to calculate your Social Security break-even point (with example)
Determining your break-even age involves some number-crunching. However, running the numbers can help you gain more clarity about your strategy. A
Here's a simple breakdown:
1. Estimate your monthly benefit at different ages
The SSA provides a personalized statement that estimates the amount of your benefit when claiming at various ages. For example, you may find your estimated benefits are $1,400 a month at age 62, $2,000 a month at age 67 (FRA) and $2,500 a month at age 70. Remember, 70 is when you get your maximum benefits.
2. Determine the difference in benefits
Subtract your estimated benefit at 62 from your estimated benefit at 70. This is the extra money you'll get each month by delaying.
3. Calculate the 'missed opportunity' cost
Multiply your benefit at 62 by the number of months you'd be delaying (from 62 to 70, that's 96 months). This is the total amount you'd miss out on by waiting.
4. Apply the break-even formula
There are a few ways to calculate your break-even age, but this is a basic one:
Break-even age = (Total additional benefits received by delaying) / (Monthly benefit difference)
For example, if your benefits are $1,400 at 62 and $2,500 at 70:
- Monthly difference: $1,100
- Missed opportunity cost: $1,400 x 96 months = $134,400
- Break-even point: $134,400 / $1,100 = 122 months (about 10 years)
- Add 10 years to your delayed claiming age, 70, so your break-even age is 80
In this example, if you live past your break-even age—80—you'll come out ahead financially by delaying your benefits until 70. If you don't expect to live that long, claiming earlier may make sense.
You can run the same equation to find the break-even points between 62 and your FRA and your FRA and 70.
- The break-even age for claiming at 62 vs. FRA is about 73.7 years old.
- The break-even age for claiming at FRA vs. 70 is 79 years old.
Remember, your break-even ages depend on your benefit estimates at different ages. A
Other factors to consider before taking Social Security
While the break-even point is valuable, you'll also want to account for other key considerations. Several personal and financial factors can influence the best timing for you, including:
- Financial goals. Balance short-term income needs with long-term financial security, including increasing potential
survivor benefits. You may need the income to cover expenses or financial hardships.
- Other income sources. Consider how pensions, savings and other investments may impact your decision to claim early. A
retirement income calculator can help with planning.
- Current income needs. When deciding on a claiming age, factor in your current and expected lifestyle, expenses and debts. If you have a lot of debt, claiming early may help cover those payments.
- Lifestyle and health. Your health, family history and work plans also can influence the optimal timing for claiming benefits. If you plan to
continue working, you may increase future benefits earnings.
