Social Security Claiming Age: Theoretically Optimal vs. Real World Decisions

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An important choice in retirement planning is when to start claiming your Social Security benefits. If you claim earlier, your monthly benefits will be reduced for the rest of your life. If you claim later, your monthly benefits will be increased for the rest of your life. Here is how much of the benefit taken at “full retirement age” will change based on your birth year. Taken from using data from Found via Early Retirement Forums.

This can be a complicated question, but if you were to force a rule of thumb*, it would probably be to wait to claim as late as you can in order to maximize your total lifetime benefits. (* Don’t just follow this blindly. There are many online calculators to help you with the details, especially for couples, like the free Open Social Security.)

Social Security is the only place you can “buy” a lifetime of guaranteed inflation-adjusted income. The difficulty is that you have to “buy” it by living off your other investments until your claim age.

Here are some interesting charts from the article The Retirement Solution Hiding in Plain Sight: How Much Retirees Would Gain by Improving Social Security Decisions, which analyzed the “actual Social Security decision and wealth accumulation of 2,024 households in a Social Security Administration sponsored panel survey.”

As you can see, the optimal claim age to maximize total lifetime benefits is mostly tilted towards the maximum age of 70. However, the actual claim age is heavily clustered towards the earliest possible age of 62.

How much difference are we talking about? Here is a chart showing of the average lifetime increase in income if you went for the optimal instead of the actual (in percentages).

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  1. Dan Shiner says

    We disagree. I believe you should start collecting Social Security the first chance you can, like the day you turn 62. There are a number of reasons for this. First, you have no idea how long you will live. Collecting twice as much at age 72 won’t matter if you die at 67. Second, by investing in a basic S & P index fund, historically you will do better than waiting. The S & P has average returns (with dividend reinvestments) of about 10%/year, or 25% more than waiting to start collecting Social Security, which increases 8%/year. Third, think of it this way: Suppose I offered you $12,000/year now, or 8% more for each year you waited to start collecting payments. How long would you wait? Until you are 70? 80? 90? The argument that you should wait as long as possible is clearly flawed. If that were the case, everyone would wait until they were dead. Fourth, no one knows when Social Security will run out of money. Right now, the best projection is that the Social Security Trust Fund (which is only IOU’s issued by the government—the actual money collected for Social Security was all spent the moment it was received) will run out in 2033. Would you prefer to start collecting now, and receive your payments for at least ten years, or wait ten years, and perhaps never receive any full payments? Sure, the government might do something, but considering how gridlocked they are, I wouldn’t bet my Social Security on it.

    I started collecting Social Security the day I turned 62. Since then, the S & P has had an average annual return of 10.77%. Had I waited until I was 70 to start collecting, I would have lost out on $37,262. I spent 40 years in corporate finance. My sister in law, who was a CPA and an MBA, repeatedly told me what a terrible mistake I was making to start my Social Security so early. She decided to wait until she had to start taking it, at age 70 1/2. Unfortunately, she died when she was 69.

    • All very good points, and the same reasons I started at 62 as well. When I did the math, I believe it was about 10–13 years, if I waited till 70 before I would break even with the money I received since 62. I lost my brother at 66, so there is no guarantee any of us will make it til 70.

    • I agree with you, you made several good points. It seems the old adage is true about a bird in the hand.

    • Sure, on average it’s better to collect that money at 62 and invest it, for the reason you state. However, waiting until 70 provides great protection against inflation risk, and also makes people more comfortable investing their entire nest egg in the stock market knowing they can ride out any dips with that big monthly inflation-protected payment coming in. Like any insurance, on average you’ll lose, but I think it’s still worthwhile to “buy.”

      As for worrying about SS running out of money, I think it’s extremely unlikely they’ll reduce payments for people who are already 62+. They’ll raise the retirement age for younger people and/or increase the earnings subject to FICA.

      • In my situation, I am getting contradictory results: Open social security recommends at FRA (67 yo); FireCalc put out a better outcome if I start at 62 yo. It’s a gamble either way.

    • Venkat Kompella says

      Finally, someone put words to my thoughts. I agree completely. I cringe whenever I see articles extolling the virtues of waiting. Even if you don’t make any return on your early withdrawls (which is highly unlikely), it takes 12 and half years just to break even, if you wait till age 70 and get 8 percent more for each year waiting (8% times 12.5 = 100%). So, you need to live at least till 82 and half years old (or your spouse should live).

      • Daniel White says

        Great analysis, when you add an investment rate of return on the accumulation you may need to be 90 to come out ahead… far greater than life expectancy, not to mention your loved ones will inherit the lump sum savings from 62-70…. SS does not give back benefits you never withdrew in the event you die before taking your first check. The SS calculator needs lots of caveats on footnotes.

    • Let’s not create panic with misinformation. The 2023 OASI social security administration says it is funded at 77% of benefits, and will not “run out of funds”, so if someone hasn’t retired yet, it’s reasonable to plan for a payout of 77% starting in 2033.

      “The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, one year earlier than reported last year. At that time, the fund’s reserves will become depleted and continuing program income will be sufficient to pay 77 percent of scheduled benefits.”,exceeded%20income%20by%20%2422.1%20billion.

      • Yes, I was not as clear as you are, but I did state that if one waited 10 years to collect their Social Security payments, they might never receive full payments. As things currently stand, even if the trust fund runs out of money in 2033 as projected, the Social Security funds being withheld from current workers would be enough to pay Social Security recipients 77% of their benefits. Of course, this is only an estimate, and as the full brunt of the baby boomer retirements come into play, coupled with a declining work force, it may well end up considerably less than 77% if Congress does nothing. Still, I would rather collect 100% of my benefits for ten years, then collect (hopefully) 77% of my benefits, rather than wait ten years and never collect my full benefit.

    • I’ve come to the same conclusions. For me, the difference of I love to 90 is negligible if I average it out between 63 and 70.

  2. The only way for any individual to know the optimal age to claim Social Security requires a crystal ball as one needs to know one’s age of death. The average life expectancy for males in the USA is about the same as the break even point of claiming at 62, age 79. That beak even point does not take into the consideration of the passive income lost on monies removed from one’s portfolio by not collecting Social Security (if not working) between 62 and 70 which pushes the break even point closer to 80. A question I asked myself when I made the decision was what enjoyment will an extra dollar bring me at age 62 vs. age 80,, the Go Go years of retirement vs. the No Go years of retirement. Finally one should be mindful that Social Security can’t be transferred to your heirs but monies saved by taking Social Security early can be inherited. Good luck to all who face this decision.

    • You’d have to know your age of death, but also the future rate of inflation. I think annuities in general are trash and would never buy one, except for this special one that’s inflation-adjusted. There’s a reason it’s not available privately.

      According to this actuarial table, the average life expectancy for a 62 year old male is 81, and for a female 84:

      I’m still young (early 40’s), so we’ll see what the SS landscape looks like in 20 years, but assuming I’m in at least average health I expect to wait until whatever the max age is and then root for myself to live a long life. If I die before the break-even point, I’ll have no regrets because I’ll be dead, and if I die after the break-even point, I’ll treat myself to some nice at home medical care.

  3. Daniel White says

    I agree with Dan Shiner and started SS at 62. The “calculator” does not impute an investment rate the early SS income when saved will generate, the fact that you choose to take it or not suggests that you don’t need it anyway. Not to mention the equity of your SS saved up from 62-70, 8 years! An average SS check for 8 years
    with compounded investment returns, would be in the $200,000 range, then that money would continue to earn and have equity for your loved ones.
    Furthermore I had a 17 yo child at 62 that qualified me for additional benefits until completion of High School, another $10,000 I would have lost out on by waiting.
    As a CPA and full time investor in my opinion the SS calculator is flawed.

  4. My mother died unexpectedly 2 months after she turned 70. She paid into Social Security her whole life and waited to collect at 70 like the experts say. I don’t think she received a single check. This is anecdotal, of course, but something to keep in mind when deciding when to collect.

    • I took Social Security at 62 four years and two months ago. The value of my portfolio has increased by more than 2X what Social Security has paid me since starting it. In essence I have not spent a penny of my Social Security income yet and if I die tomorrow that money will go to my heirs. Just another example of something to keep in mind.

  5. For single people, SS is a use it or loose it scenario and best to collect as soon as you turn 62.

    Married folks may need to consider spousal benefits and all but I still agree that collecting sooner rather than waiting as Dan Shiner mentioned above

  6. ——– dont think too much, only one thing matters, YOUR HEALTH,
    therefore, i would start @ age 62, the next 1 hour 1 day 1 minute


  7. Son of a Boomer says

    My dad was all set to start collecting at 62 until he realized that income would bump him out of Affordable Care Act subsidies, drastically reducing the net value he got from those payments. Just something to consider if that applies to your situation.

    For those who die earlier (than age 70 or so), did they have enough money for what they needed while they were alive? It certainly can feel like they “lost the game” by not optimizing the amount collected (and thus enjoying the money or leaving it to their heirs) but you could also view the choice to claim later as an insurance policy for a long life. If they die young, they had what they needed anyway.. and if they live longer, they know they’re covered. You certainly wouldn’t want to *plan* on dying at 70 and then run out of money. Now if they were suffering through their 60s, barely scraping by while looking ahead to more comfortable 70s, that’s a different story.

    Term life insurance can be a similar bet. If it expires at age 65 and you’re still alive, you could view it as money wasted and you’d have been “better off” having not bought it. However, it bought you peace of mind. Deciding to claim SS later could be the same thing.

  8. Troy Brown says

    Say you invest every dollar collected starting at age 62; what % return would you need to earn to break even or beat waiting to collect at age 70?

    • Daniel Shiner says

      In theory 8%, as that is the amount your Social Security would increase each year you delay starting your benefits. But as I and others have pointed out, that is subject to a lot of caveats.

  9. Or split the difference and retire at your full retirement age?

    • Not a bad idea, especially if you are still working. SS benefits are somewhat taxable if you are still working before full retirement age.

  10. I have a coworker who is 70 now. She started to collect her SS at 65, and she is waiting to retire from the government job next year when she can get 100% of Calpers pension (2.5% x 40 years of service). In my opinion, I would rather collect the pension at 55 (assuming 20 years of service), but hold off collecting SS later. What do you think?

  11. This really is the most important issue in personal finance for the average person for whom Social Security will be the vast majority of retirement income. The two issues that seem important to me are

    1) A dollar at 62 is worth infinity dollars at 92. In my 60s I want to travel and see the world as much as possible. If it means I’m very poor in my 90s so be it.

    2) Social Security is the best insurance policy against living a very long time. It is theoretically possible to plan out one’s stock portfolio in such a way that is perfect, but in real life you will either save way too much and not spend enough or run out of money. Realistically, people in their 80s and 90s are not capable of making good financial decisions with a big pot of money.

    Additionally, many people at the end of their lives are in a situation where they have to spend down all their assets so that the government will pay for a nursing home. In this case you’d rather have a higher Social Security amount (not an asset) rather than stocks.

    The obvious solution seems to be to take Social Security at age 70 but retire earlier, perhaps at 65 when Medicare kicks in. Fund your lifestyle from your investments from age 65-70 and then take Social Security. Enjoy your 60s but lock in the highest guaranteed income you possibly can into old age. If you spend all your assets, you still have a decent income ($60K for a married couple?) coming in and its guaranteed until you die.

  12. I don’t really need my social security at 62. So I was going to wait until I was 70 but after reading all the comments I might have to reconsider. Jonathan what choice are you leaning toward?

  13. moomootrader says

    Take SS @ 62. Invest it all.
    If it matters to you/your family, by taking at 62, even if you don’t need it, you’ll find an account that is inheritable and can be passed along to them.
    Say you live to 70, $2200/month SS benefit, assume 5% rate compounded monthly:
    The Results Are In
    In 7 years, you will have $220,723.04
    If you waited you’d get $4000/month benefit, a difference of extra $1800/month.
    After 5 years @ 5% you’d have $272K BUT
    After those same additional 5 years on your age 62 start?
    To break even you’d be in your 80’s.
    AT 80:
    You’d have $768K @ 80 from age 62.
    You’d have $621K @ 80 from age 70.
    Guessing you’d maybe break even around 85-88?
    Take it at 62.

  14. Hi Dan Shiner,

    I agree with you that we should take SS at 62.
    Does anything change in a 2 income household?
    Is it always better to take at 62 whichever spouse hits that first?
    I think the answer is yes, but please chime in case we missed something

    • Hi Lisa–While my general rule is that one should start taking Social Security at 62, it is also true that there may be reasons why that is not best option for specific people. For example, up to 85% of your Social Security may be taxed if your non-Social Security income exceeds certain limits. In my case, as I am still working (part time), and have other retirement/investment income, even with a portion being taxed, it was still better for me to start taking Social Security at 62 rather than wait. You probably have to run the numbers each way to see what makes the most sense in your situation. Just be sure to include all variables, such as the earnings on the Social Security if you start taking it at 62. Of course, for the most important variables, you can only guess–how long you will live, how long your spouse will live, when (or if) the Social Security Trust Fund will run out of money (currently projected to be 2033), etc. Good luck!

  15. Read Jonathan’s post and was like, “WHAT???” Immediately came to the comments. They did NOT disappoint.

    PS: Was this a “drive engagement” post?

  16. This site is a learning journey for me, as I learn things every day doing the research for these posts, and then I learn again through the resulting discussion. Sometimes there is no single answer. From the research in the post, the fact that a “low” wealth person would “only” lose 6% of the theoretical max benefit, and “high-middle” would “only” lose 9% was interesting. You could maybe see that as a worthwhile tradeoff given that having the money earlier would enable them to withstand a forced early retirement due to layoff, retire earlier to take care of a spouse or grandkid, etc.

    However, I would point out that nearly every Social Security calculator does take into account the “time value of money”, or the concept that you can invest the money received. They also take into account life expectancy, but remember for every person that dies before the average (say 80), another person lives beyond the average. Frankly, many of them take into account so many variables, I got tired just typing them in. They usually come with default assumptions, but if you input into the calculator that you can earn a high return of investment, or that you only expect to live to a shorter age, then your optimal answer will change to be lower. Remember that Social Security is longevity insurance and was invented to prevent poverty in old age. Retirement planning for me is preventing an uncomfortable situation more than trying to maximize net worth. Literally no other insurance company in the world will agree to insure you against whatever inflation happens for the next 30-40 years. Nobody.

    Personally, when the time comes, I will spend the $150 or whatever and go through a detailed Social Security calculator and run through some of the scenarios. I won’t assume that stocks will earn a high return, because that’s not a guarantee, and volatility of returns matters a lot in the withdrawal phase. I will also assume that one of us (my wife or myself) will live to 90, because I don’t want my children to have to worry about my elder care. The last time I tried in a joint scenario, it told me that one of us should claim at 62 and the other at 70. So there, I’m diversified with Social Security as well! 🙂

  17. “Retirement planning for me is preventing an uncomfortable situation more than trying to maximize net worth.”

    This is the feeling I have that I couldn’t figure out how to put in words. Perfectly said.

    I’m surprised by the number of people here worried that they might get shortchanged by claiming too late than worried that they might get slammed by high inflation decades after claiming at 62. There’s a tendency to lump “old age” all together without realizing just how long “old age” can be. The difference between age 37 and 62 is the same as the difference between 62 and 87, and PLENTY of 62 year olds live to 87, especially healthy ones with money. People wouldn’t lump 37 and 62 together, but they sure do with all the “old ages.” Waiting until 70 to claim and then having the comfort of that guaranteed fat check coming in each month, and knowing that it won’t be whittled away by inflation, is just too good to pass up.

    • If that means working longer you are trading your time with good health for money. At age 62 I was quite aware that time is rather finite and money can’t buy more of it. The fundamental question do you have enough money with SS to enjoy life going forward. If yes and you don’t take SS IMO one is foolishly trading irreplaceable time for money

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