Ask Rusty – Doing a breakeven analysis


Dear Rusty:

I’m in a bit of quandary trying to decide whether I should take my Social Security now at 62, or wait until some later time, like maybe when I’m 66.  I know that I’ll get less money by taking it now, but I also know that my check will be bigger if I wait longer.  I’m in pretty good health and don’t really need the money right now, but I’m just unclear about whether it’s best to wait, or just take the money and run.

Signed: Wondering

Dear Wondering:

You’re asking, of course, one of the most common questions we receive – should I collect now, or wait until later?  Social Security is designed so that, at least theoretically, you get the same amount of money either way.  If you claim early your checks are smaller but you get more of them; if you claim later, your checks are bigger but you don’t get as many. Again, that is theoretically. In reality, whether or not it is to your financial advantage to wait to apply for benefits depends nearly entirely on your health and expected longevity.  Of course, no one knows how long they will live, but if you examine your health, your living habits and your family history, you can make an educated guess at whether you’ll meet the current average longevity, which for men and women today is their early to mid-eighties.

To help with your decision, you may benefit from doing a breakeven analysis, which shows what your total received Social Security income would be in a couple of different scenarios.  You can easily look to see how long you would have to live to collect the same amount of money if you claimed at, say, age 66 compared to what you would collect if you didn’t wait and instead started benefits at age 62.  It goes like this: Get a Statement of Benefits from Social Security (you can do this online), which shows your estimated benefit at age 62, at your full retirement age (e.g., 66) and also at age 70. Using those numbers, first add up the total amount you would collect between ages 62 and your full retirement age by multiplying your monthly age 62 benefit times the number of months until your full retirement age (48 months in this example).  Now subtract your age 62 monthly benefit amount from your full retirement age monthly benefit; use the product of that subtraction and divide it into the number from the previous calculation (the total you would collect between 62 and 66).  The result will be the number of months from your full retirement age you would have to collect in order to get the same total amount of money as if you claimed at age 62.  In the simple example I just used, you would need to collect about 12 years beyond your full retirement age, or to age 78, before you have collected the same amount of money as if you claimed at age 62.  You can do the same exercise using age 66 vs. age 70 and you’ll find that you breakeven at about age 81. If you live beyond your breakeven age, you’ll collect more in total benefits by waiting.

These numbers may vary slightly depending upon what your true full retirement age is and what your actual estimated benefits are, but this will give you a pretty close idea of when you would break even financially. Yes, it’s a roll of the dice because no one knows how long they will actually live, and your current financial needs and health must always be part of the equation, but doing a breakeven analysis can be an important exercise to help you decide.

The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed in this article are the viewpoints of the AMAC Foundation’s Social Security Advisory. To submit a request, contact the Foundation at