Evaluating your Social Security decision can be tricky. Waiting to start benefits can pay off—if you live long enough. We’ll show you one way you can look at your situation.

Video: Evaluating Your Social Security Decision

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There aren’t a lot of choices you can make when it comes to your Social Security Retirement Benefits. In fact, you only have one choice–when  do you start?  So should you claim your benefits as early as possible, or should you wait?

Today we’ll dig into the numbers to show you how waiting can pay off in the long run.

Before we get into the weeds too far, let’s lay down a foundation. This is a simplified scenario, and there are often many different moving parts. We created this illustration using some generic and simple assumptions.

Also, for this episode, we won’t be talking about the impact this decision has on your retirement savings or other parts of your life. Those things should also be considered.

Your situation is unique. Please consult a professional before making any significant decisions.

A Case Study: Tom and Mary's Social Security

One of the biggest decisions Tom and Mary will make is when they start their Social Security. Do they retire this year? If so, it means they receive their benefits for a longer period of time.

But it also means, their benefits get reduced. In this case by 27%. In real dollar terms, it means they receive less.

Waiting means the discount shrinks, and they receive more each month compared to age 62. 

And if they delay their retirement to age 70, they qualify for delayed retirement credits. This is where your benefits increase by 8% for each year you delay your decision.

62 vs. 65: Evaluating Their Options

Waiting to retire at age 65 means they receive $612 more per month. But they also receive fewer monthly payments over their lifetime. It will be worth it, if they live long enough. But how long do they have to live to “break even.”
This graph shows the cumulative benefits starting at age 62 (dark green line). And the total benefits received starting at age 65 (light green line). We are looking for where the two lines cross. This is how long they have to live to make waiting worth it.
4 reasons to not start Social Security at 62
If they live to age 80, waiting to take their Social Security makes sense. What about some other ages?

62 vs. Full Retirement Age (66 and 6 Months)

Evaluating Social Security
SOcial Security
The break even point pushes out to age 82. This makes the “payoff” of waiting a little less certain, but certainly within reason.

62 vs. Maximum Benefits (Age 70)

Evaluating Your Decision
Delayed Retirement Credits make this interesting. The break even point is age 83. It might be too far away to make it worth considering. But, if they are healthy, they might want to.

Full Retirement Age vs. Maximum Benefits

Of course we should look at this option.  If they decide to work until their full retirement age, should they consider waiting until age 70 to collect Social Security?
Evaluating Your Social Security Decision FRA v 70
With a break even point of age 84, they may not be comfortable taking the risk.
A lot of factors go into evaluating your Social Security decision. The break even point of your cumulative benefits is only one of them. If you would like help looking at your numbers, please click the button below (or give us a call). We would be glad to show you how you can include Social Security into your retirement plans.
Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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