Why I Wouldn't Claim Social Security Without Knowing This Important Number
Key Points
Claiming Social Security before or after full retirement age decreases or increases your benefit, respectively.
Your break-even age is when the total benefits from claiming at two ages become equal to each other.
You should consider your break-even age when deciding when to claim Social Security.
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As people approach retirement, one of the more pressing questions is when they should claim Social Security benefits. For some people, the answer is straightforward because they need the money as soon as possible. For others, the decision is less clear-cut because they have greater financial flexibility and could reasonably survive without the benefits.
If you find yourself in the latter group, there's one particular number I'd know before making a Social Security claiming decision: your break-even age. Knowing this number will give you more perspective on which decision best fits your personal situation and plans.
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How your claiming age affects your Social Security benefit
Your full retirement age is when you're eligible to receive your base monthly Social Security (called your primary insurance amount), but you're free to begin claiming benefits at age 62 or delay claiming benefits past your full retirement age.
Claiming benefits before your full retirement age reduces your primary insurance amount by 5/9 of 1% monthly, up to 36 months. Each additional month after that further reduces benefits by 5/12 of 1% monthly. If your full retirement age is 67 (anyone born in 1960 or later), here's how much your monthly benefit would be reduced based on your claiming age:
- Age 66: 6.6%
- Age 65: 13.33%
- Age 64: 20%
- Age 63: 25%
- Age 62: 30%
Delaying benefits past your full retirement age will increase them by 2/3 of 1% monthly (8% annually) until you turn 70 years old. After that point, delaying benefits no longer increases them.
How your break-even age works in Social Security
In Social Security, your break-even age is when the total lifetime benefits from claiming at one age equals the total from claiming at another age.
To see it in action, let's assume your PIA is $2,000 and you're debating whether to claim benefits at 62 or at your full retirement age (67). By claiming at 62, your monthly benefit would be reduced to $1,400, but you'd receive benefits for 60 months before reaching 67 ($84,000 total, not including annual cost-of-living adjustments).
It's not until around age 78.7 that the total benefits from claiming at age 62 equal those from age 67. That's the break-even age between the two. Before 78.7, you would have received more lifetime benefits by claiming at age 62. After that, you would receive more by claiming at 67.
A helpful note: Break-even ages are the same for two ages, regardless of the benefit amount. For instance, the break-even age between 62 and 70 is 80.4. The break-even age between 67 and 70 is 82.5. Use these numbers to help you decide whether claiming early for a lower benefit or delaying for a higher benefit is worth it.
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