by Andrea Norris-McKnight

When is the best time to start claiming your Social Security distributions? What’s your break even age? We ask a CFP for his thoughts on how you can determine your ideal age to collect.

You’ve been saving up for retirement your entire life. You’ve been eyeing your savings, managing your budget, and thinking about when it makes sense to retire comfortably. Chances are, if you’re planning your retirement, you’ve probably also thought about your Social Security disbursements. But when is the best time to start claiming your Social Security distributions?

To answer that question, we reached out to Michael C. Angelucci, MBA, CFP. Here are his thoughts on figuring out the best time to claim Social Security:

Q: When is the best time to start thinking about claiming Social Security distributions?

Mr. Angelucci: The sooner, the better for most people! This is a critical component of many retirement plans. For the average earner, Social Security will replace only about 40% of annual earnings. If the Social Security benefit will not meet a person’s retirement goals, there will be more time to consider the three main options available to meet those goals: save more, work longer, or adjust retirement spending goals.

Most importantly, one should not apply at age 62 before they do an analysis with a qualified professional. Making the correct decision can result in increased Social Security benefits of tens of thousands and, often, hundreds of thousands of dollars over a retirement. In fact, I say to my pre-retirement clients, “If you never speak with me again and do not follow any of my recommendations, at least review your options before you go to the Social Security office. There are enough online services and fee-only advisers who can provide the service at a reasonable cost.”

Finally, for those who are lucky enough to plan on retiring before their Full Retirement Age, the age at which one can collect their full benefit (FRA), they may have a decrease in what Social Security shows as a benefit. Social Security calculates a person’s benefit on the highest 35 years of earnings. Most importantly, it assumes that one will earn the amount of your last year’s wages from their current age up to their FRA. For example, if a person is considering retiring at age 55, their benefit will most likely be lower than the estimated benefit statement they received from Social Security. This is because the actual benefit, when calculated, will not include the higher earnings that would have been earned had they continued to work.

Q: Why is delaying claiming social security a more optimum choice in an overall retirement strategy?

Mr. Angelucci: Delaying may not work for some, but for those who can draw from savings in order to delay benefits, I will site three major reasons:

Decreased longevity risk: Almost all retirees worry about running out of money. As shown above, the delay increases a benefit that will keep paying until a retiree dies. If savings is spent or lost due to poor investment management, the higher Social Security benefit will keep paying. There is not a safer, guaranteed, inflation adjusted, benefit available to retirees.

Spousal benefit: Another large benefit that is often not considered is the spousal benefit when a partner passes away. This is especially powerful in a situation where one spouse has a much higher benefit than the other. The classic example is the stay-at-home wife whose benefit is half of her husband’s benefit. The wife will step up to her husband’s higher benefit if he predeceases her. Therefore, every year the husband delays until age 70 is a higher benefit the wife will have if the husband pre-deceases her. The wife could potentially have a $10,000 a year higher benefit if her husband delayed his benefits until age 70. (See The #1 Thing Couples Should Know About Social Security.)

Increased long-term wealth: Every year a retiree delays, up to age 70, their Social Security benefit increases by approximately 8%. It’s hard to beat that in a low interest rate environment. For example, assume a retiree needs $25,000 per year to live on, has $500,000 saved, and is at Full Retirement Age (FRA) with a Social Security benefit of $25,000. The retiree can either take his benefit or take $25,000 out of his savings for his needs. When interest rates are near 0, if he takes the $25,000 from savings, he is not giving up any lost earnings. But, he is gaining about $2,000/year in extra income for life in his Social Security benefit. The benefit goes from $25,000 to $27,000/year. In addition that extra $2,000 along with the $25,000 base benefit is increased every year by the rate of inflation for life!

Although the retiree’s savings balance will initially be diminished, the accumulation of the higher Social Security benefit starts to outweigh the amount of savings that were used in the early years. For many, this break-even age is around age 78. In fact, depending on a retiree’s situation, the retiree may end life with more in savings than if they took Social Security benefits early. This is because the higher benefit far outweighs the amount needed from savings. In some cases, the savings withdrawal can become unnecessary.

The financial planning software that I use (Money Guide Pro and SSAnalyzer) and many others clearly demonstrate this for people.

Q: Are there any circumstances where a delay wouldn’t be a good idea?

Mr. Angelucci: There are several circumstances:

Poor health: The break-even age when one delays is generally somewhere between 78 and 82 depending on the situation. If life expectancy is not expected to be beyond that age, then the retiree should not delay.

Lack of resources: Unfortunately, some people just don’t have the savings. If they are healthy, they could continue to work up to age 70 in order to allow their benefit to grow.

Economic environment of high guaranteed interest: High guaranteed interest rates greater than the 8% growth of one’s Social Security benefit would alter this decision. Then it may be more beneficial to keep money invested.

There could be a circumstance where a retiree(s) may want to guarantee that they leave a fixed bequest and they don’t want to risk that they may not live until the break-even year. Then they may need to take Social Security benefits early.

Q: When you’re considering your overall retirement income and budget, how would a delay in claiming Social Security affect that?

Mr. Angelucci: This is a critical question. There needs to be the resources available to allow for a delay. If the retiree does not have sufficient savings or other income sources such as an employer pension, they may not be able to delay.

Q: Is there something that people often forget when they are considering when to claim social security?

Mr. Angelucci: They don’t realize that the break-even age can be before age 80. In my experience, people often focus on making sure they get something out of Social Security. They feel that after all the years of paying into the system, they want to make sure they get back what they put in. I will respond by reminding them that if they die early, they won’t care whether they “got theirs.” But, if they live beyond their 70s, they will most likely be very happy for the higher benefit every month.

• Factors To Determine the Best Retirement Age for You
• Why Your Social Security Statements Are Wrong

Reviewed October 2022

About the Expert

Michael C. Angelucci, MBA, CFP is a Registered Investment Advisor in New York State. He blogs at Level Financial Advisors.