June, 2018
Taking Social Security benefits before you reach full retirement age is almost never in your best interest. If you can afford to wait, delaying social security pays off over the long-term, especially if you wait to file at full retirement age or age 70.
Full retirement age, which is between ages 66-67, is when you get 100% of your benefit. The earliest you can file is age 62, and at this age you get the smallest benefit, which is about 70-75% of your normal benefit. If you delay filing until age 70, this will get you the maximum benefit, which can be as high as 132% of your normal benefit. This is because when you delay filing, you get 8% credits per year from ages 66-70. Then this higher benefit is permanent for the rest of your life, plus it gets cost of living adjustments.
Some people think they should file right away and take their benefit at the earliest age - age 62. They are afraid it will take too long for them to break even and not be worth it.
At what age will you break even and begin to come out ahead if you delay social security? Here are a few examples:
- If you file at age 66 instead of 62, it takes until ages 77 to 78 to break even.
- If you file at age 70 instead of age 62, it takes until ages 80 to 81 to break even.
- If you file at age 70 instead of age 66, which is FRA, it takes until ages 82 to 83 to break even.
According to the social security administration, the average life expectancy of a 65 year old male is 84.3 years and for a female its 86.6 years. Both male and female life expectancies are older than all the breakeven ages. This means it just makes sense to delay filing, even if you only live to the average life expectancy.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.