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If you plan to rely solely on your social security check for retirement, you may want to reconsider. Here's why.
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Find out how many years it takes to get to balance even if you delay your claim for social security benefits.

Social security card with money(Photo: Getty Images)

You can apply for Social Security benefits at the age of 62 – but should you do it? Many people – including Stanford experts – plead to delay as long as possible as the benefits increase the longer you wait. And there are indeed many good reasons to delay. Social security provides a guaranteed source of income for life. Waiting a little longer to maximize the benefits may be wise.

But if waiting entitles you to deferred retirement credits, it also means that you miss years of money that you would otherwise have received. For many years, you will need a higher monthly income to make up for all those missed benefits and reach your break-even point.

To decide if it makes sense to delay, it is helpful to know how to calculate your break-even point and have a good idea of ​​the time it takes for the deferral of benefits to be profitable.

How long does it take to delay social security benefits?

The Social Security Administration uses a formula to calculate your standard benefit amount based on your average salary over 35 years, adjusted for inflation. You will receive this standard benefit if you retire at retirement age, 67 if you were born after 1960.

If you retire before, benefits are reduced by 5/9 of 1% per month for the first 36 months prior to FRA and by 5/12 by an additional 1% for each of the previous months. If you retire after FRA, benefits are increased by 2/3 of 1% for each month late to age 70.

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To determine how much time you need to amortize your expenses by deferring Social Security benefits, calculate the amount you would have received over the years if you applied for an early repayment and then divide this amount by higher monthly benefits. if you delay.

If you received $ 1,050 a month at age 62, your annual income would be $ 12,600. If you ask at age 62 instead of waiting for 67, you will receive $ 63,000 over five years that you would not have received if you had delayed. Your monthly benefit is however 30% lower than it would have been if you had waited. If you had claimed 67 years and received $ 1,500 a month, your annual income would be $ 5,400 higher. To compensate for the shortfall of $ 63,000, you will need to receive this extra income for 11.7 years ($ 63,000 / $ 5,400). Your break-even point is at the age of 78.6 years, 11.7 years after your 67th birthday.

The calculation differs depending on your specific benefits and your lead or delay. The table below gives an estimate of when you will reach your break-even point at different ages, assuming a benefit of $ 1,500 at full retirement age of 67.

The annual benefits canceled do not take into account cost of living adjustments. However, it provides an accurate estimate of the years to balance because your COLA is based on a percentage of the amount of your initial benefit. This means that your increase in the cost of living (if there is one) is proportionately lower if you start with a lower benefit.

Age at which you claim benefits

Total benefits lost pending more than 62 years

Increase in annual income due to deferral of claims

Years to balance

62

$ 0

$ 0

NM

63

$ 12,600

$ 900

14.0

64

$ 25,200

$ 1,800

14.0

65

$ 37,800

$ 3,000

12.6

66

$ 50,400

$ 4,200

12.0

67

$ 63,000

$ 5,400

11.7

68

$ 75,600

$ 6,840

11.1

69

$ 88,200

$ 8,280

10.7

70

$ 100,800

$ 9,740

10.3

Graphic source: author.

Should you delay the claim?

In the end, many factors come into play if you have to wait to claim Social Security. But before you decide, determine how long it will take you to reach balance. If you do not think you live long enough to recover money You have failed to delay your claim; taking Social Security early might be the smartest way to maximize the total benefits received during retirement.

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