Understanding the break even point for social security can mean the difference between maximizing your retirement income and leaving thousands of dollars on the table. Your retirement plan consultant in Fresno CA, knows that the decision of when to claim your benefits isn’t straightforward. Choosing the wrong age could substantially affect your lifetime earnings.

What is the Social Security Break-Even Point?

The break-even point marks the age when your total Social Security income from delaying benefits equals the total you would have received by claiming early. It’s the moment when waiting to claim larger checks catches up to taking smaller checks sooner.

Think about this scenario: you’re entitled to $1,500 per month at age 67 but would receive only $1,050 monthly if claiming at 62. Waiting until 67 means you forgo five years of $1,050 payments totaling $63,000. But you gain an extra $450 monthly for life. Divide $63,000 by $450 and it takes 140 months past age 67 to recover that shortfall at the start. So age 78.7 becomes your break-even point where delayed benefits surpass early claiming totals.

How to Calculate Your Break-Even Point: Step-by-Step

Accurate benefit estimates are the foundations of your break even point calculation. The Social Security Administration has several calculators. The Retirement Estimator provides the most precision by accessing your actual earnings record. The Quick Calculator works without your earnings history, though results will be rougher.

Follow these steps to calculate your break-even point:

1. Get your monthly benefit estimates at ages 62, 67 (full retirement age), and 70 from your SSA account. To cite an instance, you might see $1,400 at 62, $2,000 at 67, and $2,500 at 70.
2. Determine the monthly difference between claiming ages. Subtract your age 62 benefit from your age 70 benefit ($2,500 – $1,400 = $1,100 monthly).
3. Calculate missed chance cost by multiplying your age 62 benefit by months delayed. The span between 62 and 70 equals 96 months ($1,400 x 96 = $134,400).

Comparing Social Security Benefits: 62 vs 67 vs 70

Claiming social security 62 vs 67 vs 70 produces drastically different monthly payments. You receive only 70% of your full benefit amount if you claim at 62. Someone born in 1960 or later faces a full 30% reduction by claiming five years before their full retirement age of 67. This reduction becomes permanent and affects every check throughout life.

Full retirement age grants you 100% of your calculated benefit based on lifetime earnings. That age is 67 for those born in 1960 and after. Waiting past this threshold triggers delayed retirement credits worth 8% annually. So claiming at 70 yields 124% of your full benefit.

Conclusion

We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial to see how we can help you Retire ”Your Way!”

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Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser. This commentary reflects the personal opinions, viewpoints and analyses of the author, Dale Soutas. It does not necessarily reflect the views of Foundations Investment Advisors, LLC (“Foundations”) and is provided for educational purposes only and the contents are solely maintained by and the responsibility of the applicable 3rd party . The 3rd party content is subject to change at any time without notice, and does not represent an express or implied opinion or endorsement of any specific investment opportunity, investment strategy or planning strategy. Foundations in no way deems reliable any statistical data or information obtained from or prepared by third party sources in this commentary, nor does Foundations guarantee its accuracy or completeness. No legal or tax advice is provided or intended.

This is not endorsed or affiliated with the Social Security Administration or any U.S. government agency.

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