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I hate the debate over when to claim Social Security—because it seems to be dominated by folks who fall into one of three camps.
First, there are those who have already claimed benefits, and who insist that their choice—whatever it was—is the right one and that others should follow their fine example. Second, there are those who think keeling over early is retirement’s biggest risk, so claiming at age 62 is the only way to go. Finally, there are the folks who think Social Security is headed for bankruptcy, and the smart strategy is to get whatever money you can while you can. That again means claiming at 62.
Talking to people in these three camps is often a bore because, as far as they’re concerned, there’s only one answer. But in truth, the right strategy will vary from one person to the next, and it’s important not to get bulldozed into making the wrong choice. With that in mind, here are seven guidelines for claiming Social Security.
No. 1: Even if Congress does nothing to maintain benefits at current levels—almost unthinkable, given politicians’ fondness for reelection—benefits would only be cut 17% in 2035, when the Social Security trust fund starts running dry. The upshot: Don’t get scared into claiming benefits early by all the fear-mongering.
No. 2: If you’re in poor health and single, filing early for Social Security benefits makes sense. Similarly, if you’re married and you’re both in poor health, you should probably both claim early. What if you’re in poor health and your spouse isn’t? If you were the family’s main breadwinner, filing early may be a bad decision, even if you’re in bad health—because your spouse will likely end up with a smaller survivor benefit.
No. 3: Because it’s the main breadwinner’s benefit that becomes the survivor benefit, it’s less important when the lower-earning spouse claims. Inclined to take benefits early? You might satisfy that urge by having the lower-earning spouse claim at 62 or whenever he or she stops working.
No. 4: Have you heard folks argue that you should claim early because you’ll spend more or enjoy the money more in your 60s? This argument makes no sense.
First, the goal is to take your retirement “resources” and maximize them over your retirement’s expected length—and claiming early may hurt that goal. Even if you spend more during your initial retirement years, why couldn’t that money come from savings, rather than from taking Social Security early? Second, your later retirement years could prove far more expensive than your 60s, thanks to long-term-care costs. Third, why do folks assume that money will buy them less happiness later in retirement? Does their 60-year-old self really have a good handle on what will make their octogenarian self happy?
No. 5: Filing later may mean you draw more from your portfolio during your initial retirement years, but it doesn’t mean your heirs will get less. Thanks to the larger monthly benefit you’ll have later in retirement, not only will you draw down your nest egg more slowly in those later years, but also that healthy income stream will free you up to invest even more in stocks. The upshot: If you live beyond your early 80s, delaying benefits could end up enriching your heirs.
No. 6: If you opt to delay Social Security benefits so you get a larger monthly check, how long do you have to live for that larger monthly benefit to compensate for the benefits you earlier missed? To my surprise, some contend that such breakeven calculations don’t matter. Really? I find such arguments bizarre. That’s tantamount to saying we shouldn’t care if we make financial decisions that hurt our wealth.
No. 7: Social Security is most comparable to inflation-indexed Treasury bonds—an ultra-safe investment that’s government-guaranteed and inflation-linked. The implication: If you do a breakeven calculation by assuming benefits taken early are invested in the stock market, and then compare that to taking benefits later, you’re making an apples-to-oranges comparison.
Instead, to do a fair comparison, you should assume benefits taken early are invested in high-quality bonds—and this typically puts the breakeven age at around age 80 or 82, depending on current inflation-adjusted bond yields. Live until then or later, and you’d be better off claiming benefits later. For 65-year-olds, the median life expectancy is age 84 for men and 87 for women.
To all this, I’d make one exception: If you’re a 100% stock investor, assuming that you’ll take benefits early and invest that money in stocks seems reasonable. But if you have some bonds—and those bonds will earn less than you could “make” by postponing Social Security—wouldn’t it make more sense to spend those bonds while you delay benefits? The latter will leave you and your heirs better off, presuming you live to the breakeven age.
I struggled over when to take SS, but I ultimately realized that it didn’t really matter. I’m single and my only close relative is my sister, who is 10 years younger. Neither of us is likely to outlive our money regardless of when we take SS., I ended up taking it at my FRA of 66. My sister, who is generally in good health but had breast cancer 3 years ago, opted to take her SS this year at age 65.
I got lucky, my investments since I started SS have done significantly better than inflation, which should delay the break-even point a few years.
For both my sister and me, our decisions of when to take SS won’t affect us, but will, to some extent, affect how much we leave to our favorite charities.
I think you guys are all smarter than I am and you disagree a lot. That tells me my decision to delay taking benefits until age 70 might have been the right one. I’m OK with that.
Thank You – Dave Baese
You hit on one of my two most favorite Difficult topics, Social Security, and the other is Medicare. When I was 62 that is 16 years ago, I made numerous calculations and read all I could to determine what to do along with my wife. I cannot remember all the correct terminology but it was my wife takes her standard SS at 62, and I take a delayed SS at 65, then she gets part of my SS because it is higher and I take mine at the age of 70. This may not be exactly the case but memory fades. At the time, I calculated that what I call breakeven was about 82 years old Johnathan thanks for your article as I now even feel better that my calculations were on TARGET. Keep up your great legacy of articles and continue to discuss these two very difficult topics. Thanks for all you do for Humble Dollar, we appreciate all your fine efforts.
Two comments:
And yes, I agree it is a highly personal decision that depends on a variety of variables some of which are very qualitative in nature.
I did as the last paragraph says, I elected early and since I didn’t need the money I invested in VIG. It’s been 6 years now and I’m happy with the decision.
Just a side note…Delayed retirement credits are applied monthly so if you choose to delay SS after age 67, your SS amount increases at .0066%/month or 8%/year. For example, delaying until 68 1/2 (18 months) increase your SS amount 112% of FRA. (And the COLA will be on the higher amount.)
Here’s a link to calc the effect of a delayed retirement.
https://www.ssa.gov/OACT/quickcalc/early_late.html
Without having read all “40” of the comments as I write this, so my apologies if this is a repeat of anyone else : NO ONE IS RIGHT. NO ONE CAN BE RIGHT……the only way to be right is to know “a priori” when you’re going to die. Without this information, everyone is merely guessing. If only we could poll the deceased, and ask them how it worked out for each and every one of them 😜
But the same, of course, could be said of every financial decision. Will the U.S. stock market continue to outpace others? Will inflation come roaring back, destroying bond values? We all make the best choices we can based on the information available to us — but there’s always a chance we’ll be wrong, and perhaps badly wrong. That’s the nature of risk.
When it comes to bonds, in January 2019 I inherited a significant amount cash from my parents. I decided to invest in an intermediate term bond fund in order to obtain a greater return then I could receive with CDs, and I figured it would be at least five years before I touched the money.
Things were cruising along with great returns until 2022 when I was a victim of what has been called the worst bond market in history. I was heartbroken as I watched the value crash to significant losses, even though I know my initial investment decision was sound.
Luckily I took John Bogle’s advice, “don’t just do something, stand there”, and earlier in the year the investment turn into positive territory (although overall less than a 1 percent return).
Luckily the government protects us investors from some losses so I know at this point I can claim capital losses on my taxes in the future.
I will respectfully disagree. The major and perhaps “only” variable on when to claim SS, is knowing how long you will live – for most, unknown. By contrast, some/ many of the other financial decisions we are required to make have, albeit not always perfectly reliable, some financial history to help guide these choices – a 60/40 portfolio is likely to succeed; a 4% withdrawal rate is likely to succeed ; annuities, though quite unpopular will likely help you to succeed ; a diversified portfolio portfolio is likely to help you succeed, etc. One has essentially nothing to fall back on when choosing when to start SS because its based on survival, and there is minimal to no data on how long any given person will survive. Even those with advanced cancer (I am a retired medical oncologist) can survive for vastly different amounts of time.
Doesn’t that assume you are concerned with collecting the most possible in the aggregate as opposed to collecting the monthly income needed when it is most needed?
I cannot see how anything other than immediate income is important.
The total I collect on my pension matters not at all to me, but the monthly payment sure does and I do want that to continue a long time so that I am an actuarial loss.
Great article. One minor nit: when looking at options 2 & 3 together, they don’t apply when the survivor can’t collect on the deceased spouse’s social security record. 12% of retiree’s are impacted by Government Pension Offset (GPO). For many of them, options 2 & 3 aren’t completely correct. Since GPO impacts 12% of retiree’s and since I suspect some of them may not know about it, it’s worth at least briefly mentioning in articles such as this.
Great summary that covers many of the bases of this all-important decision.
One aspect of the when-to-claim decision I don’t see discussed nearly enough (probably because it’s so uncomfortable to contemplate), is what happens to a surviving spouse that’s been bankrupted because the other spouse needed long-term care that required the couple to burn down all of their assets before being eligible for Medicaid. In that case, the surviving spouse is going to be a lot better off with the largest benefit possible, since it’s pretty much the only income-producing asset that they’ll have left. Medicaid will have confiscated nearly all of their retirement accounts (and any other assets in their name, except maybe their house) by this time, and it will make that “investment” to claim later look mighty good.
I wish I could say that I believe this to be a long-shot scenario, but I’ve seen it happen enough to people close to me in the last few years to make me think otherwise.
Yes! We are concerned about this very scenario with a family member who has ALS at age 60. Chris
Under those and similar circumstances, a $1 million or even $2 million portfolio could be burned down frighteningly quickly. And Long-Term Care insurance is no saviour, as most policies–at least, those that most average folks can afford to purchase–cap out at something like $250k anyway; that is, if you can actually get them to pay off at all. Pretty scary stuff.
Unlike mytimetotravel, I felt the the breakeven calculation was everything. I starting taking payments at 66 because that calculation showed that if I waited until 70, I wouldn’t break even until I was well past 80, and I didn’t want to wait because although I’m healthy now, my medical history indicates I’m unlikely to reach 85.
So I decided I’d rather be tucking the money away now and ease any possible feelings of financial stress.
Had I known how well lucrative my continuing consulting work would be — I expected it to ebb away, but revenue this year will more than double my projections — I might have waited. But no regrets. My SS payments have been making well over 5% in a money market fund. And I love that cushion.
Agreed, although a larger-sized survivor benefit can also be very important under certain circumstances. We’ll probably do something similar to what you’ve done–and be like John Yeigh, and be only half-wrong (but hopefully live long enough to also be half-right!)
When folks say they don’t care about the breakeven calculation, I scratch my head. Do they also not care if their savings account offers a minimal yield, or their funds have high expense ratios, or their realtor is charging a full 6% commission? In personal finance, most folks are looking to get the most from their money. Why behave differently with Social Security?
SS is not based on your investment – taxes paid, but earnings, one can and has been changed without the other.
The average person gets back in benefits all they paid in taxes in a few years. I received in benefits all I and my employer paid in about six years. In the aggregate workers only actually pay for about 15% of total benefits paid.
There are many people collecting SS never having paid a penny in taxes. What about a current and ex spouse both collecting full benefits on one workers earnings!
Breaking even on the SS investment is pretty easy. It’s insurance, not actually an investment, and like all insurance there are winners and losers, but mostly big winners in SS.
This is probably the only insurance where you want to be a financial winner and likely to be so.
A breakeven calculation is not about recouping the Social Security payroll taxes you paid. It’s about how long you have to live to justify claiming at a later age.
https://humbledollar.com/money-guide/breaking-even-on-social-security/
Is it not true that waiting until 70 means my monthly check will always be larger than if I taken SS at 62, or even at FRA? I stand a good chance of living to my later 90s, and I am worried about inflation. I also recognize that my SS deductions funded people who were retired while I was working, and don’t see that money as somehow “mine”.
Yes, if you believe you’ll live to your 90s, a breakeven calculation says you should delay Social Security until age 70.
But I didn’t make the decision on that basis, and if I am on my death bed next year (at 78) I will not regret waiting until 70. If I think about money at all, I will be thankful that I had “enough”.
I take issue with No. 6. Again, this is an individual decision. If you care about leaving a legacy, then “wealth” is a concern. But I am single with no biological children. It would be nice if my nephews and nieces and ex-step-children inherited something, but it is not my top priority. Being able to live comfortably for the rest of my life is my top priority, which means I waited until 70 to get the highest possible basis for future cost of living increases. I could afford to do so partly because I drew a spousal benefit on my ex-husband’s account at FRA, and partly because I had a pension, but “wealth” was never my concern. I have no interest whatsoever in whether I “break even” – I’ll be dead, so I will neither know nor care.
Kathy, I’m glad to see your comment. That was exactly my situation (even including the ex-spousal benefit at FRA; except annuities instead of a pension) and my reasoning, too. Besides, I was working until age 70 anyway. Retired since 2021, zero regrets about the SS decision.
I used this tool to make the decision – it was posted on HumbleDollar sometime ago. https://opensocialsecurity.com/. Based on my personal situation, the tool recommended my wife start at 62 and I start at 70. I am 65, retired last year from tech industry, have enough in stock accounts. Had differed comp that I am drawing down on till I get to 70. SS from 70-73 and then RMD+SS. Spouse has a small pension as well. will let her use her SS and pension for whatever she wants. I saved assuming SS will go broke at some point – maybe not. My Differed comp will likely runout by 73, just in time when my RMD kicksin. If push comes to shove, cut some expenses and make do with whatever you have. I do have to option to not wait till RMD kicks in to dip into a substantial traditional IRA funded through my 43 years of working career. So, I am in the #3 camp.
Jonathan, I have even heard the excuse, in the case of married couples, That the surviving spouse will have”enough” without the main breadwinner having to wait until age 70 to claim benefits. However, with what’s been called the “widows penalty”, surviving spouses, can bear a greater tax burden, even if their income has decreased.
A surviving spouse likely will have to shift their tax filing status and may experience changes in how Social Security benefits are taxed. When a spouse dies, the surviving spouse may become a single filer which can come as a jolt.
having the additional cushion of the higher payout can be a welcomed Boost.
I have seen the survivor’s tax increase many times.
Doesn’t that depend on how much of total income SS provides the couple as to how important an age 70 benefit may be? I also think there is an age factor, especially if the surviving spouse is older. You may be talking about survivor income that only needs to last a few years.
needless to say, if a person takes the gamble to wait until age 70, for it to work they actually must make it otherwise they may have given up more than they gained.
Jonathan, I’d add a camp #4, those who think delaying to 70 is the only right answer.
I personally plan to delay to 70, but recognize that’s not the answer for everyone.
When I run Mike Piper’s Open Social Security calculator, I’m told that to maximize our lifetime benefits, I should take my benefit at 62 yrs 9 mos and my (3 year older) wife should take hers at 66 yrs 1 mo. If, however, we delay and both take the benefit four years and three months later at my FRA of 67, the reduction in our lifetime benefits is only 3.5%. A reduction like that would have a negligible impact on our retirement finances. Moral of the story: I’m not agonizing over this decision at all. We will probably start at my wife’s FRA, but it’s no big deal if we pick the “wrong” date.
Ken, one thing that might be worth looking at is changing the Mortality Table selection. There’s a little box at the top that the user can check that brings up more options. Checking the Mortality Table box adds an additional pulldown item for each person. I just checked a notional case and using the “best – non-smoker super-proffered” mortality table adds an additional 18.5% in estimated lifetime benefits. Obviously none of knows how much time we have left, but if one is a healthy non-smoker you or your spouse may live well beyond the standard estimates. If one is considering delaying SS to provide the highest benefit, or survivor benefit, considering a more realistic estimate of their longevity. For example, the non-smokers in my family and my wife’s family lived considerably longer than the smokers. We are both non-smokers, so maybe we will get lucky with our longevity.
Rick, running that scenario only reinforces my original conclusion. Using the “best” mortality table, the model tells me to start both of our benefits at my wife’s FRA–which is what I currently plan to do. If we wait until my FRA, the reduction is only 1.9%.
Why do you care at all about projected lifetime benefits, Ken?
I don’t, really. That’s what I mean about not agonizing over the decision. But to have an empirical basis for making a decision that eventually must be made, it seems like that is a reasonable metric.
I wrestled with this decision before retiring at age 66. My wife is 2 years older than and not in good health. I chose to claim upon retirement because all of the males in our family died by age 73, and I did not think I would make the breakeven age of 82.
I have no regrets but Jonathan’s point about using bonds to delay benefits makes a lot of sense. I did not consider that at the time but could have easily done that. Delayed SS makes a great annuity.
A great annuity with a 100% survivor benefit!
This sort of discussion only applies to the perhaps half of the population who have some assets. For those who reach 62 still working in a minimum wage job, with credit card debt and no hope of other income, SS may seem like reaching an oasis in the desert. These people will be working until health issues prevent it. Their existence is why you have to take claiming statistics with a degree of caution.
That’s a bit of over generalization. Only about 1% of the hourly wage workers earn the federal minimum wage and most are young. If a person reaches age 62 in that state they have been living in poverty all their lives and the SS benefit will be not much better, maybe not all, than still working.
It is disingenuous to mention the federal minimum wage. Only 5 states do not have their own higher min wage. CA is $16, and WA is over $17. Even at these higher numbers income is insufficient to rent lodgings or really have a life. And, SS for them is not an alternative to working, They will work and collect. You can earn around $22k and still get 100% of your benefit.
Substitute $20 per hour for the minimum wage and I think the premise is still valid. That equates to about $40k per year, and in an average cost of living community, one could still have hard building wealth.
Sad but oftentimes true.
We fell squarely into your #3 camp. Chris retired at age 64 and turned her SS on. By virtue of my birth year I was able to collect a spousal benefit until I turned 70. To me this strategy seemed like a no-brainer.
As for #6, I didn’t bother with breakeven analysis. I simply didn’t need the money either from my own SS benefit or from my savings.
I contend that many people that do a breakeven analysis misinterpret the numbers, and use that to justify a wrong decision. Example: A friend who took SS at age 65 argued that it would have taken him to age 77 to breakeven. He continued to work and spent every dime. Now he’s 82, broke, and living solely on his reduced SS.
Dan, my wife and I did the exact same thing. My wife took SS at 64, and I started taking a spousal benefits at 66. When I reached 70 last year I then started taking my higher benefit. Seemed like a no-brainer, but I wonder how many people were even aware of that strategy? But fortunately it is no longer available.
UNFORTUNATELY no longer available
Robert, I recommended this strategy to a number of colleagues, who were happy to be eligible. Alas I was born too late to use it!
Great argument for deciding if the facts support claiming early, rather than delaying until 70. Under 4, I love the implication that, at 62, I may still be too young to know what’s good for me. It gives me some mental growth to look forward to over the next couple of decades. 🙂
This is the most overthought subject there is.
The reality is most people start their benefits when they need the money without regard to any calculations.
I suspect that’s why only about 2% wait until age 70 (according to Bankrate data). 27% start at age 62 and nearly 25% at age 66.
The experts confuse the decision even more by going into breakeven calculations which to me make zero sense. People aren’t or shouldn’t be trying to breakeven when starting benefits, they should looking at the time they need the most income from all sources or alternatively- as in my case- using SS as a cash accumulation tool and income.
The only thing perfectly clear is there is no one size fits all, no template for all to follow. To some SS is the foundation of retirement and to others it’s gravy.
I disagree with delaying to 70 for the goal of providing higher survivor income. There are better ways to do that through investments or life insurance and more tax efficient IMO.
Richard, I agree with most of what you write, however, I won’t abandon the idea of waiting in order to provide a larger benefit to the surviving spouse. Don’t you need to have a substantial amount of assets to isolate in order to generate the required dividends? And doesn’t this come with an element of risk not shared with waiting to age 70? I’m impressed with your strategy and I know it’s workable, but it may not be suitable for the average retiree.
There are variables, especially the age difference between spouses and the age of the anticipated survivor. If you wait until 70 how much longer after the like death of the primary income person is the survivor likely to live?
In other words, what period of income is of concern. It may be only a few years in reality. How much of that could be covered by tax-free paid up life insurance?
It’s not just the dividends on investments it’s the investment pool in total just as it may be used by the couple. What is like to be the balance at the first death?
Of course, for the few with pensions survivor annuities need to be factored in.
“If you wait until 70 how much longer after the like death of the primary income person is the survivor likely to live?”
Like Jonathan says, it depends. I’m five years older than my wife. My wife’s parents lived well into their 90’s. Even if I live into my 90’s, there’s a great chance that my wife will still be alive and need my higher benefit.
“It may be only a few years in reality.”
Indeed it “may,” or it may not. (And if it’s a long time, then was enough life insurance bought to cover that?)
Waiting to 70 isn’t right for everyone, but survivor benefits is a legitimate consideration in deciding when to claim.
Remember, you only need enough insurance to cover the difference between the two SS amounts. In other words the extra monthly amount accrued to age 70. In any case the insurance is only a part of the picture.
I‘m not really sure if that’s correct or not, and in any case the insurance comment in paras was beside my actual point. Even if you’re correct about insurance, survivor benefit is a legitimate consideration in deciding when to claim SS.
Buying life insurance at a later age is very costly. I can’t imagine how it could be financially better than simply delaying Social Security — though I’m sure you can find insurance salespeople who make that claim!
For those that are interested in the life insurance scenario Ed Slott’s The Retirement Savings Time Bomb is Ticking Louder explains this technique (although I must admit it somewhat confused me).
Laurence Kotlikoff’s Maxifi Planner also utilizes insurance in his suggestions.
The key is that the life insurance is tax free!
The one advantage I can see from life insurance as a solution is that if I die today, my spouse gets the insurance. For her to get my age 70 benefit, I have to live long enough to claim it. But I still think that’s the right solution for us.
You are right, not something to do at the last minute.
I used to run a program for employees called Thinking About Retirement. It was designed for people at least five years away from the retirement.
There was usually a lively discussion about survivor options and their cost in terms of lowering the employees pension.
There was always someone in the audience who had gotten an insurance quote with a premium equal to or less that the annuity adjustment to the pension. It was hard to argue with them, but I pointed out:
Make sure the premium won’t increase or the amount of insurance decrease.Other than that the proceeds were income tax free and the benefits would never be lost as the beneficiary could always be changed if the spouse died first. In many cases the amount available per month was several hundred dollars a month.
This decision should be made at the youngest age possible. Obviously SS is not a pension, but the concept is similar.
Dick. I was thinking about the same thing. Several decades ago I recall listening to near retired engineers discuss the possibility of life insurance instead of taking a joint and survivor option. As I recall most were so close to retirement that they could not find a policy that made sense. As you say the SS survivor question is related but different in several ways. I’ve been trying to figure out how someone close to claiming are would actually implement it. One thing to remember, delaying SS not only benefits the survivor but the person receiving the higher benefit. Insurance only benefits the survivor.
Great article. You saved me some work. I’ve been contemplating a Social Security Claiming “Decision Tree” that encompasses most of the points you document. For example, I was speaking last night with a friend and colleague who will turn 62 in a few months. His full retirement age (FRA) is 67. It was just announced that the NASA project he is working on will be terminated in March. He will face a layoff at that time. He is a very experienced electrical systems engineer and should have future opportunities for a high-paying job. He also turned on a 30 year pension a few months ago, so he has some income. He is married, healthy, and interested in working for at least 3 more years, possibly for 5-7 more years. He is the main breadwinner – his physicist wife chose to stay home and home-school their 4 daughters. Claiming SS at 62 likely makes no sense for him as any future engineering salary would greatly exceed the SS earnings limit ($23,400 in 2025) for folks under FRA. He has 2 granddaughters and his first grandson on the way. He and his wife are devoted parents, so their children’s and grandchildren’s locations will definitely play a role in retirement decisions. He should reevaluate the analysis each year as he approaches 65 (Medicare), 67 (FRA), and his desired retirement age.
I think we debated this one quite a bit last month on a post by Quinny. But you’re spot on if the answer is, ‘it depends’. There are to many variables in play dependon the individual, making a one size fits all approach very short sighted. With that being said, your claiming strategy should encompass your complete financial picture and gols to support your decision. This is a topic that can easily be debated with solid points on all sides of the argument. The key is that one must review and understand the options presented to you. Quinny’s decision may not be the best for someone else and my decision might suck for still another person.
Mike