As you approach retirement, one of the more pressing decisions you must make is when you plan to claim Social Security benefits. It's a decision that shouldn't be taken lightly because it permanently affects the value of your monthly Social Security benefits.
Two popular ages for claiming Social Security are 62 and 70 because those are the earliest and latest ages most people will take benefits. The good news is you have options. The not so good news is this decision isn't always straightforward. Luckily, there's a magic number that can help you decide: your break-even age.
How claiming at 62 and 70 affects your monthly benefit
Your monthly Social Security benefit changes based on when you claim Social Security and your full retirement age (FRA). This is the age at which you qualify for your primary insurance amount (PIA), or full benefit.
Claim before FRA, and you will receive less than 100% of your PIA as the Social Security Administration reduces your benefit by a fraction of a percent for every month you claim early. That might not sound like much, but it can add up quickly.
For people with a FRA of 67 (which includes most Americans), claiming as early as possible at 62 would mean receiving just 70% of their PIA.
Delay benefits past FRA, and the opposite happens. The government will reward you with a small bump each month until your benefit maxes out at 70.
With a FRA of 67, someone claiming at 70 would receive 124% of their PIA. To put things in perspective, their benefit claiming at 70 would be 77% larger than their benefit at 62.
The magic number that can help you make your claiming decision
The magic number that can help you decide between the two options is your break-even age. In Social Security, your break-even age marks when the total benefits received from claiming at one age equals the total amount from claiming at another age. The concept applies to any two scenarios you're considering, not just the claiming ages of 62 and 70.
As an example, let's imagine someone is eligible to receive the average Social Security benefit at FRA ($1,870 in June 2024). This means their monthly benefit would be roughly $1,309 or $2,319 if they claimed at 62 or 70, respectively.
Here's how their cumulative benefits would add up over the years.
| Claiming Age | Total by 75 | Total by 80 | Total by 81 |
|---|---|---|---|
| 62 | $204,204 | $282,744 | $298,452 |
| 70 | $139,140 | $278,280 | $306,108 |
Calculations by author.
The break-even age between 62 and 70 is just after age 80. Before then, you would receive more from Social Security by claiming at 62, even with the reduced monthly benefit. After that point, it flips, and total benefits are higher when claiming at 70.
Your break-even age is one piece of the puzzle
Once you know your break-even age, you must decide whether the increased monthly benefit is worth the wait. When you consider the reality of missing 96 Social Security payments between 62 and 70, it puts the decision into perspective. Even then, there is no right or wrong choice, just the best choice for you.
If Social Security will be a large part of your retirement income, it may be beneficial to claim as early as possible, so you can have guaranteed income coming in while reducing the rate at which you drain any personal savings you have. But if you're comfortable covering your retirement expenses on your own, it may be worth delaying benefits so you can maximize your monthly payout (and potentially your lifetime benefit).
In either case, it's important to remember that Social Security claiming decisions should consider other factors too, such as your personal health, family health history, retirement plans, and spouse's financial situation, among others. You may find that between those details and your break-even age, your claiming decision is essentially made for you.
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