Should You Wait to Collect Social Security?

One of the most common questions we get is, "Should I wait to collect Social Security until I turn 67?" To help answer this, let’s look at the numbers and consider the broader implications for retirement planning.

Social Security Benefits by Age

Let’s use the example of someone born in 1968 who earned an average annual salary of $50,000. Here’s how their benefits could look depending on when they decide to retire:

At Age 62

They would receive approximately $1,410 per month.

At Age 67, (Full Retirement Age)

This amount increases to $2,014 per month.

The key question is: "How long would it take to make up the difference if they wait to start collecting benefits at 67 instead of 62?"

Calculating the Cost of Waiting

Here’s how we break it down:

If someone starts taking their Social Security benefits at age 62, they’ll receive $1,410 per month. Over the next 5 years, they’ll collect a total of:

$1,410 (monthly benefit) × 12 months × 5 years = $84,600

By the time they reach age 67, they will have already collected $84,600. 

However, if they wait until age 67 to start their benefits, their monthly payment will increase by $604, raising it from $1,410 to $2,014. Hence, they'll collect a total of: 

$2,014 (monthly benefit) × 12 months × 5 years = $120,840

Break-even point

To figure out how long it takes to make up for the $84,600 they missed by waiting until age 67, we divide that total by the extra $604 they’d get each month:

$84,600 ÷ $604 ≈ 140 months (about 11 years and 8 months) Again, it would take about 11 years for you to make up that amount. 

This means they would break even around the age of 78 years and 8 months.

Quality of Life Considerations

While the numbers are essential, retirement is about more than just money. It’s also about enjoying your life.

1. Health and Activity Levels

For many, the early years of retirement are when they’re healthiest and most active. This is often the best time to travel, pursue hobbies, or spend time with family. Waiting to collect Social Security might mean sacrificing some of those opportunities.

2. Spending Patterns in Retirement

People tend to spend more in the early years of retirement when they’re more active. As they age, expenses often decline, particularly for discretionary items like travel or entertainment.

3. Life Expectancy

According to recent data, the average life expectancy for an American woman is 77.43 years. For someone with an average lifespan, waiting until 67 to collect benefits might not result in receiving significantly more Social Security over their lifetime.

Beyond Social Security: The Bigger Picture

It’s easy to get caught up in calculations, but Social Security is just one piece of the retirement puzzle. Factors like taxes, inflation, and healthcare costs can have a much greater impact on your financial future.

Many people feel overwhelmed or scared when thinking about retirement, but the right information and a solid plan can make a big difference. If you’re unsure about your options, a financial professional can help you evaluate your situation and make informed decisions tailored to your needs.

Conclusion

If you delay taking Social Security until age 67, it would take about 11 years and 8 months to break even compared to starting at 62. While waiting for results in a higher monthly benefit, the decision should also account for your health, lifestyle, and long-term financial goals.

Remember, retirement is about more than numbers—it’s about creating a life you can enjoy. Sometimes, all you need is a little guidance to feel confident about your future.

HYPOTHETICAL CALCULATIONS

Recalculated Cost of Waiting to Collect Social Security for Individuals Earning $100,000 and $150,000 Annually

We’ve prepared hypothetical calculations for two individuals earning $100,000 and $150,000 annually. These figures focus on the cost of waiting to collect Social Security benefits rather than calculating the total benefit amount.

If you’d like personalized calculations tailored to your financial situation, feel free to reach out and schedule a meeting.

Example #1: Individual Earning $100,000 Annually

At Age 62:

• Monthly benefit: $2,500

At Age 67 (Full Retirement Age):

• Monthly benefit: $3,333.33

Difference in Monthly Benefit:

$833.33 ($3,333.33 - $2,500)

Break-Even Calculation:

• Total benefits collected by age 67 if starting at 62:

  $2,500 × 12 months × 5 years = $150,000

• Time to recover the $150,000 difference:

  $150,000 ÷ $833.33 ≈ 180 months (15 years)

• Break-Even Point: Age 82.

  After this, delaying benefits results in a net financial gain.

Example #2: Individual Earning $150,000 Annually

At Age 62:

• Monthly benefit: $3,750

At Age 67 (Full Retirement Age):

• Monthly benefit: $5,000

Difference in Monthly Benefit:

• $1,250 ($5,000 - $3,750)

Break-Even Calculation:

• Total benefits collected by age 67 if starting at 62:

  $3,750 × 12 months × 5 years = $225,000

• Time to recover the $225,000 difference:

  $225,000 ÷ $1,250 ≈ 180 months (15 years)

• Break-Even Point: Age 82.

   After this, delaying benefits results in a net financial gain.

NUTS & BOLTS

How It Works

Using our tool is designed to be quick and insightful. Here’s what you can expect:

• Input Key Information: Provide details like your income, current expenses, retirement accounts, and general retirement age goal. This information helps us assess your current financial health and needs.
• Receive Your Personal Snapshot: With this input, we’ll generate an initial overview of your retirement readiness. This serves as a helpful guide, showing you where you stand and any adjustments that could help you reach your goals.
• Focus Your Strategy: Use these insights to shape your approach. Whether it’s saving more, recalculating your expenses, or rethinking your target retirement age, these personalized recommendations keep you informed and on track.