Few decisions as you near retirement are as important as when you decide to claim Social Security benefits. It's a decision that will permanently affect how much you receive, so it's best not to gloss over it.
However, before making a Social Security claiming decision, I'd tell retirees to find out their break-even age, which is when the total lifetime benefits from claiming at one age equal those at another age.
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This is one of the best ways to get perspective on the broad implications of your claiming decision.
When you claim Social Security permanently affects your benefits
Your monthly Social Security benefit begins with your primary insurance amount (PIA). This is the monthly amount you'll receive by claiming benefits at your full retirement age (FRA). Below are FRAs based on birth years:
Starting at your FRA, Social Security will adjust your monthly benefit based on whether you claim before or after then.
If you claim before your FRA, Social Security will reduce your monthly benefit by 5/9 of 1% monthly, up to 36 months. Each additional month after that will further reduce benefits by 5/12 of 1%. Assuming your FRA is 67 (which is true for most new claimers), here's how much your monthly benefit will be reduced based on claiming age:
| Claiming Age | Monthly Benefit Reduction |
|---|---|
| 66 | 6.67% |
| 65 | 13.33% |
| 64 | 20% |
| 63 | 25% |
| 62 | 30% |
Table by author.
On the flip side, delaying benefits past your FRA will increase them by 2/3 of 1% monthly until you reach age 70. This works out to 8% annually and a roughly 24% increase if your FRA is 67 and you delay until 70.
Use your break-even age to help you decide if an early or delayed claim is worth it
Much of the Social Security claiming decision comes down to whether you want smaller monthly benefits for a longer period or larger monthly benefits for a shorter period. Knowing your break-even age can be beneficial in this case because it gives you more perspective on which claiming age aligns best with your financial needs and timeline.
To see how your break-even age plays out, let's assume you're debating between claiming benefits at 62 and 70, with a monthly benefit of $2,000 at 67 (your FRA). Your monthly benefits at those ages would be $1,400 and $2,480, respectively, and below is how your lifetime benefits would play out:
| Monthly Benefit | Total Benefits Received at 80 | Total Benefits Received at 80.4 |
|---|---|---|
| $1,400 (age 62) | $302,400 | $309,120 |
| $2,480 (age 70) | $297,600 | $309,504 |
Table by author.