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Although you can start collecting Social Security as early as age 62, waiting until age 70 can maximize your benefit and allow it to reach the highest possible amount.
According to the SSA, “If you wait until age 70 to start your benefits, your benefit amount will be higher because you will receive a delayed retirement credit for each month you delay filing for benefits.”
That said, if you die sooner than expected, this strategy may cost you a large sum of money that you will never get back.
Why might waiting until age 70 be risky?
If your full retirement age is 67, your benefit at that age will be about $2,000 per month. If you wait until age 70 to claim, that benefit grows to about $2,480 per month. However, by delaying your Social Security by three years, you skipped 36 months of payments, meaning you’re leaving $72,000 on the table.
Delaying a claim may make more financial sense if you actually live long enough to maintain the balance. For most people, that break-even point falls between the ages of 78 and 81. If you live further than that, it’s a good idea to delay. If you don’t do this, you have actually lost money.
How to Calculate Break-Even Age
Here’s an example to help you better understand how to calculate your break-even age.
Let’s say your Social Security benefit is $1,400 per month at age 62, and $2,480 per month if you wait until age 70. By waiting, you skip 96 months of $1,400 checks. That’s $134,400 you didn’t collect while you waited.
Once you start collecting at age 70, you’re getting an extra $1,080 per month compared to the amount you would have received at age 62. So to even it out, you would divide the money you missed by the monthly benefit, which is $134,400/$1,080 = 124 months, or 10.3 years. This means your break-even age is 80.3 years.
So what happens if you die at 78?
In this case, if you start claiming your Social Security at age 62, you will have collected benefits for 16 years. This works out to a total of approximately $268,800 ($1,400 per month for 192 months). If you waited until age 70 to start saving, you’d only be able to save for eight years, a total of about $238,080 ($2,480 per month for 96 months). So, in this scenario, claiming Social Security early would actually give you $30,000 more over your lifetime.
Now, to be fair, you can’t predict when you’ll die. Delaying until 70 may still make sense if you’re in excellent health or worried about depleting your savings. But it’s not just about life expectancy. You should also take into account your savings, whether you are still working, and how much income you need when making this decision. Talk to a financial advisor who can help you run the numbers.