One of the biggest decisions you'll make while planning for retirement is when to claim Social Security.
Most people can claim at any point once they reach age 62. However, if you wait to claim your benefit, you'll receive a higher monthly check. So, even while you go without a Social Security check during the early years of your retirement, it can pay off in the long run.
The catch is you have to live long enough to make it worth delaying benefits.
While nobody can be certain how long they'll live, new data from the Centers for Disease Control and Prevention (CDC) has some insights about the average senior citizen you'll want to consider. It may make a huge difference in your decision to claim Social Security.
Image source: Getty Images.
When is it worth it to delay Social Security?
If your goal is to maximize your lifetime Social Security benefits, your decision ultimately comes down to one thing: How long can you expect to live?
Your monthly benefits check is calculated based on your work history and when you claim, relative to your full retirement age (FRA). If you were born in 1960 or later, your full retirement age is 67. Those born in 1954 or earlier have a full retirement age of 66. Those born in between will reach full retirement age between 66 and 67 years old.
If you wait until your full retirement age, you'll receive your primary insurance amount. But claim early, and you'll receive a reduced amount. Claim later, and you'll earn a higher amount.
Here's the percentage of your primary insurance amount you'll receive at different ages given different full retirement ages.
| Claiming Age | FRA 67 | FRA 66 1/2 | FRA 66 |
|---|---|---|---|
| 62 | 70% | 72.5% | 75% |
| 63 | 75% | 77.5% | 80% |
| 64 | 80% | 83.33% | 86.67% |
| 65 | 86.67% | 90% | 93.33% |
| 66 | 93.33% | 96.67% | 100% |
| 67 | 100% | 104% | 108% |
| 68 | 108% | 112% | 116% |
| 69 | 116% | 120% | 124% |
| 70 | 124% | 128% | 132% |
Data source: Social Security Administration. Table and calculations by author.
While claiming early permanently lowers your monthly benefits check, you'll receive more checks over your lifetime. You'll have a head start over someone waiting until 70 to claim their benefits. However, if that person lives long enough, they'll collect enough of their bigger checks that they end up with more lifetime benefits from Social Security than someone who claimed as soon as they were eligible.
So, just how long do you have to live?
The following table shows the breakeven ages for various claiming scenarios.
| Claiming Scenario | FRA 67 | FRA 66 |
|---|---|---|
| 62 vs. FRA | 78 and 8 months | 78 |
| 62 vs. 70 | 80 and 5 months | 80 and 7 months |
| FRA vs. 70 | 82 and 6 months | 82 and 6 months |
| 69 and 11 months vs. 70 | 85 and 5 months | 86 and 5 months |
Table and calculations by author.
While many people focus on milestone ages like 62, 70, and full retirement age, the reality is that you're making a decision every month you don't claim Social Security. So, the real breakeven age in the case of delaying all the way until 70, as seen in the table above, is between 85 and five months and 86 and five months, depending on your full retirement age.
There's one wrinkle, though.
The above calculations don't factor in the annual cost-of-living adjustment you'll receive from the Social Security Administration (SSA). Most years, the SSA adjusts your benefits check for inflation by a certain percentage. And the same percentage on a bigger check results in a bigger absolute increase in your benefits. As such, the breakeven ages are actually earlier in reality. The above numbers represent the absolute maximum time needed to reach breakeven.
What the new data from the CDC has to say
Every year, the CDC updates its life expectancy estimates based on the current health environment.
The country saw a major setback due to the COVID-19 pandemic, and it still hasn't fully recovered. Life expectancy at birth in the United States is just 77 years and 6 months. That's up 1.1 years from last year's update but still down significantly from before the pandemic.
Image source: Getty Images.
But that's not the age seniors should be considering when making their Social Security decision. Seniors need to consider how much longer they can expect to live once they've reached a certain age like 70.
The data here shows small improvements over last year. The average 60-year-old can expect to live until 82 and 8 months. A 65-year-old should reach 83 and 11 months on average. And the average 70-year-old can expect to reach 85 and 4 months.
So, the data suggest you should lean pretty heavily toward delaying if you consider yourself in average health or better. When you factor in the likely impact of the annual cost-of-living adjustment, practically everyone should expect to be better off in the long run by waiting all the way until age 70, all things being equal. Indeed, a 2019 study found the majority of seniors would maximize their lifetime benefit by waiting until 70 to claim Social Security.
What's more, average lifespans should continue improving as the country recovers from the fallout of COVID-19 and continue to march back toward pre-pandemic lifespans and beyond.
While there are good reasons to claim your benefits early, the data shows most people will be best off waiting as long as they can.
