Of course, the average is just that— an average— and most people live either shorter or longer lives. That's where the break-even point comes in.
Calculating the cost of your decision
The break-even calculation is inexact; annual cost-of-living adjustments, and changes in your income if you’re still working, mean the amount of your monthly benefit can fluctuate even after you start collecting it. But you can still get a rough estimate of your break-even age.
Say you are closing in on 62 and considering your benefit options. You know, from checking your online My Social Security account or using AARP’s Social Security Calculator, that you are in line for an estimated $1,800 a month if you hold off claiming until your FRA of 67.
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Starting at 62, your payment would be 30 percent less, or $1,260 per month.So, between the ages of 62 and 67, you would receive$75,600 in benefits ($1,260 for 60 months).
If you wait until you turn 67, you give up that initial$75,600 but would receive$540 more per month, or $6,480 more per year. At that rate, it would take about 140 months (11 years and eight months) to make up for the money you’d forgo by claiming benefits later. At around age 78 and 8 months, you reach the break-even point, when your cumulative benefits from claiming at 67 surpass those you’d get by taking retirement at 62.
You can use a similar calculation to determine the break-even age for taking your maximum benefit at age 70 — in this example,approximately $2,230 a month.
Starting at 62, your benefits would come to$120,960 over the next eight years. Starting at 70, you’d getapproximately $970 more a month, orabout $11,640 more a year. It would take about 10.4 years to break even, so you’d be 80 and change when claiming your maximum monthly benefit begins to pay off in terms of total dollars.
FAQs
The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount you'd receive if you started taking them at age 62.
How to calculate break even age for Social Security? ›
Divide the total amount you would have received by your full retirement age by the amount given up each month by taking benefits early. This will give you the number of months it will take to break even.
Is it better to collect Social Security at 62 or 67? ›
If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase. If you start receiving benefits early, your benefits are reduced a small percent for each month before your full retirement age.
At what age do you get 100% of your Social Security? ›
The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67.
What is the catch up age for Social Security? ›
Individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions.
What is the Social Security 5 year rule? ›
If you become disabled before your full retirement age, you might qualify for Social Security disability benefits. You must have worked and paid Social Security taxes in five of the last 10 years.
What is the Social Security 3 year rule? ›
They can get benefits if you have credits for 1 and 1/2 year's work (6 credits) in the 3 years before your death. If you are receiving retirement or disability benefits at the time of your death, we will pay your survivors based on that entitlement.
Why do smart people take Social Security at 62? ›
Simply put, the later you claim Social Security, the higher the monthly payment. Age 62 is the earliest you can claim benefits; “full retirement age” is when you're entitled to 100% of your monthly Social Security retirement benefits.
What is the #1 reason to take Social Security at 62? ›
1. You're Planning Your End-of-Life Care. Your Social Security benefits stop paying at your death, so if you die before collecting benefits, you'll have missed out on benefits entirely.
At what age is Social Security no longer taxed? ›
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
Surviving spouse, any age, with a child younger than age 16, gets 75% of the worker's benefit amount. Child gets 75% of the worker's benefit amount. There's a limit to the benefits we can pay to you and other family members each month. The limit varies between 150% and 180% of the deceased worker's benefit amount.
What is the highest Social Security check at age 62? ›
The maximum Social Security benefit at full retirement age is $3,822 per month in 2024. It's $4,873 per month in 2024 if retiring at age 70 and $2,710 if retiring at age 62.
Can I draw Social Security at 62 and still work full time? ›
You can get Social Security retirement or survivors benefits and work at the same time. However, there is a limit to how much you can earn and still receive full benefits. If you are younger than full retirement age and earn more than the yearly earnings limit, we may reduce your benefit amount.
What is the minimum Social Security payment at age 62? ›
What is the minimum Social Security benefit at age 62? The youngest age at which you can begin claiming the minimum Social Security benefit is 62. In 2024, the special minimum Social Security benefit for retirees at age 62 will be around $2,710.00 per month.
What age does Social Security end? ›
Your benefits last as long as you live. Taking benefits before your full retirement age (as early as age 62) lowers the amount you get each month. Delaying benefits past full retirement age (up to age 70) increases the monthly amount for the rest of your life.
How do you calculate break-even point in SSI? ›
A beneficiary reaches the break-even point when the countable income equals or exceeds the SSI individual's or couple's applicable Federal Benefit Rate (FBR). The break-even point is not the same for every SSI recipient but varies depending upon the individual's or couple's applicable FBR and countable income.
What is the formula for the break-even point? ›
To calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin. Here's What We'll Cover: What Is the Break-Even Point?
How is Social Security calculated if you don't work 35 years? ›
If you do not have 35 years of earnings by the time you apply for retirement benefits, your benefit amount will be lower than it would be if you worked 35 years. Years without work count as zeroes in the benefit calculation. Learn more at www.ssa.gov/OACT/COLA/Benefits.html.
Is Social Security based on the last 5 years of work? ›
Social Security bases your retirement benefits on your lifetime earnings. We adjust or “index” your actual earnings to account for changes in average wages since the year the earnings were received. Then we calculate your average indexed monthly earnings from your highest 35 years of earnings.
