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Is it preferable to claim Social Security early or wait? It’s a tough topic to answer because everyone’s position is unique, but also because outliving your income has major consequences.

Sadly, many seniors are unprepared for this difficult decision, and the Social Security Administration (SSA) and its agents perform a “terrible” job of assisting retirees.

Let’s look at some facts, including when you can break even on Social Security and why you might wait until age 70 to claim your benefits.

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In what year can you claim Social Security?

Social Security benefits begin at age 62. The SSA estimates that in 2020, over 23.5 percent of males and 25.7 percent of women will retire at age 62.

But you won’t get your full retirement payment at that age, many retirees opt for a lower benefit for life rather than wait.

But what does waiting for a bigger wage cost? A lot, in fact.

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You’ll get your entire benefit if you retire at full age (age 67 for those born in 1960 or later).

Plus, delaying your claim until age 70 earns you extra benefits. You won’t get a bonus after that, so there’s no point to wait for over 70.

If you collect your benefits early, you will lose.05% of your monthly income for up to 36 months before your typical retirement age.

If you file more than 36 months early, you lose.05% every month.

If you are 67 and file at 62, you lose 30% of your total benefit (36 x 5/9 + 24 x 5/12).

So if your full benefit was $1,000 at 67, you’d get $700 at 62. (A typical Social Security check.)

Social Security not only encourages you to wait until you reach full retirement age but also to wait longer.

Waiting three years after full retirement age increases your annual pension by 8%. (if you were born in 1960 or later).

So if your full benefit was $1,000 at 67, you’d get $1,240 at 70.

‘Get What’s Yours: The Secrets to Maxing Out Your Social Security’ is co-authored by Laurence Kotlikoff, an economist at Boston University and co-author of the book. “Waiting on Social Security pays out big.”

With that out of the way, let’s do a quick analysis to see when the average person should claim their benefit.

Then we’ll discuss why it might not make sense for you or another person to do what’s reasonable.

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When does Social Security pay off?

If you want to maximize your lifetime Social Security benefits, you should complete a break-even analysis to determine the ideal time to file.

Or do you claim early and get more years of Social Security, or do you wait (say, until age 70) and get a considerably larger benefit?

Assume your total retirement benefit is $1,000. We’ll also assume a 2% annual rise in the benefit, both for the actually paid benefit at age 62 and the accumulated benefit at age 70.

At 62, your first monthly payout is 30% less than your maximum amount, or $700. Your benefit at 70 would be $1,240 + inflation.

Here’s the math and a break-even age for Social Security.

Age Annual benefit from age 62 Annual benefit from age 70 Cumulative benefit (age 62) Cumulative benefit (age 70)
62 $8,400 $0 $8,400  $0
63 $8,568 $0 $16,968  $0
64 $8,739 $0 $25,707  $0
65 $8,914 $0 $34,622  $0
66 $9,092 $0 $43,714  $0
67 $9,274 $0 $52,988 $0
68 $9,460 $0 $62,448 $0
69 $9,649 $0 $72,097 $0
70 $9,842 $17,434 $81,939 $17,434
71 $10,039 $17,783 $91,978 $35,217
72 $10,240 $18,139 $102,217 $53,356
73 $10,444 $18,501 $112,662 $71,857
74 $10,653 $18,871 $123,315 $90,729
75 $10,866 $19,249 $134,181 $109,978
76 $11,084 $19,634 $145,265 $129,611
77 $11,305 $20,027 $156,570 $149,638
78 $11,531 $20,427 $168,101 $170,065
79 $11,762 $20,836 $179,863 $190,901
80 $11,997 $21,252 $191,861 $212,153

Around age 78, the later filer surpasses the younger filer in total Social Security benefits.

As you can see, the later filer gets at least $9,000 more annually, or $750 more every month.

From age 80 to 90, the later filer accumulates over $103,000 extra – over $10,000 per year.

By age 90, the late filer gets nearly $123,659 more than the early filer.

Waiting to file is clearly the best option if you expect to live a long period.

The question is whether one can collect it. So, let’s look at life expectancy at 62 and 70.

According to the US Census Bureau, a 62-year-old can expect to live another 21 years, for a total of 83 years.

A 70-year-old can expect to live another 15 years, for a total of 85 years. Your projected life expectancy increases with age.

Early filers began taking higher total earnings at around age 78, according to break-even analysis.

But since these groups are projected to live much longer, they should file at 70 and make more money over their lifetime.

Yet, in 2020, just 5.9% of men and 7.5% of women filed at age 70 or older.

Is it odd that so many retire early? No. For the simple reason that we aren’t all average. But there are others.

Top reasons to register for Social Security early Americans have several solid reasons to file early, but Kotlikoff argues most would be better suited waiting until age 70.

“For 85% of Americans, filing at 70 is the greatest option,” he argues, but only a few do. “Some Americans must begin early for financial or other reasons.”

Here are some reasons why Americans may choose to retire early.

You need cash now.

The situation of Americans’ retirement savings is abysmal.

According to a recent Bankrate survey, 36% of Americans have never had a retirement account, and 52% of workers feel their retirement savings are inadequate.

Waiting longer for Social Security benefits can be difficult, especially if you have responsibilities to pay now.

How to calculate Social Security benefits.

You do not expect to live long.

Many Americans may file for Social Security early since they do not anticipate living that long.

The Census Bureau projects a 21-year increase in life expectancy at 62, but many Americans will not reach that age. So it makes sense to claim benefits early.

You don’t want to maximize your benefit

Given the uncertainty of health and aging, many retirees may not choose to max out lifetime benefits.

They’re alive and able to enjoy life now, not in years. Many people desire to retire from the grind of the working world, and Social Security helps them do so.

Others may make plans to travel, see family, or indulge in hobbies they’ve neglected.

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You have a unique case.

“Most people know about the retirement benefit but not the other 12,” Kotlikoff says.

Social Security provides benefits to the disabled, ex-spouses, surviving spouses, minors, and retirees.

That’s why a simple break-even analysis like the one above is useless.

Not prescriptive, it provides a simple situation that is unlikely to apply to most people.

With so many options, you must design a plan that meets your needs.

He tells potential filers to think about their situation and to be wary of Social Security representatives who may give bad advice that isn’t tailored to their scenario.

Their advice is virtually always bad, he says.

Reasons to delay Social Security benefits until age 70

Few retirees wait until age 70 to claim their Social Security payment, which is increased by 24%.

Why should Americans contemplate delaying benefits?

You expect to live longer.

A break-even analysis may help, but no one is average.

“To breakeven is to play average,” explains Kotlikoff.

There’s reason to assume you’ll live longer than the break-even point, providing you extra money later on.

You don’t want to lose money.

According to the Bipartisan Policy Center, 15% of 62-year-old men will live to be 92, and 14% of 62-year-old women will live to be 95.

[A beneficiary] may have to live on only their decreased monthly payment if they claim early and outlive all their assets, according to the center.

One of the biggest risks of an inadequate retirement fund is outliving your money.

You may find yourself with significantly restricted cash flow with little or no recourse.

“Prepare for the worst,” Kotlikoff advises.

You want to maximize your SSI benefits.

If you want the most money from Social Security — after all, you’ve paid into it for decades – filing later increases your chances.

It’s not a certainty, but every year you withdraw money past the break-even point, you’re maxing it out.

Obviously, if you don’t intend to live long, you’ll max out. But the real answer will come with time.

In short,

Making an informed decision about when to take Social Security is difficult.

Complicating matters is the fact that retirees must consider their own longevity while making choices.

Taxes and other sources of income may alter if you opt to accept Social Security.

So if you want to maximize your benefit, you need to work with a specialist.

The appropriate choice could soon recoup the advisor’s fee.

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