Ask the Expert: Is there a break-even age for collecting Social Security?

You've written about delaying Social Security to get a larger monthly benefit. Let's say I can retire at 66 but wait until 70 to collect benefits. Wouldn't I have to live a minimum number of years just to recoup the money I didn't get for those four years? For example, let's say between 66 and 70 my total benefit would have been $88,000. Instead, I start at 70 with a benefit that's $24,000 a year. In that example, I'd have to live to almost 74 to break even ($88,000 divided by $24,000 equals 3.6). Am I looking at this right?

Yes. But you're not looking at the whole picture. Break-even isn't the most important consideration. The main reason for postponing Social Security isn't a bigger starting benefit. It's that delay will dramatically increase the size of your benefit many years later.  

Break-even age is only an estimate. It depends on inflation and tax rate assumptions and benefit amount. But actuaries say someone taking Social Security at 66 instead of 62 generally breaks even at age 78; and someone taking Social Security at 70 instead of 66 breaks even at 82.

They also say you and/or your spouse may live much longer. Recent Society of Actuaries data show that a 65-year-old man now lives to age 85.6, and a 65-year-old woman to age 87.6. And those are averages. Half of all 65-year-olds live longer. A 65-year-old married couple in good health face a 44 percent chance that one spouse will live to age 90 and a 25 percent chance one spouse will live to be 95. The survivor inherits the bigger Social Security benefit.

The bottom line

Whether postponing Social Security makes sense for you depends on your financial situation, your health, and your marital status and family longevity.

More information

ssa.gov/planners/retire/delayret.html

ssa.gov/planners/retire/agereduction.html