Contributed by: Josh Bitel, CFP®
When it comes to retirement planning, few decisions are as consequential as when to claim Social Security benefits. I’ve heard it dozens of times: “my paycheck has been funding this benefit for decades, it’s my money and I want it as soon as I can get it!” While I can sympathize with this, the drawback of claiming your benefits too soon could cost you thousands of dollars over your lifetime and could even impact spousal financial security.
Understanding the Claiming Window
The earliest you can claim Social Security benefits is age 62. However, taking this offer immediately comes at a significant cost – your monthly benefit will be permanently reduced by roughly 30% for folks who have a full retirement age (FRA) of 67. On the other hand, you can delay receiving your benefits beyond your FRA, up to age 70. The benefit of doing so is an increase of 8% per year for every year you delay beyond your FRA.
The mathematical difference between claiming at age 62 and delaying until age 70 results in a benefit that is 70%-80% higher for those who delay. This increased benefit is locked in for life and adjusts for inflation annually. Additionally, an often-overlooked part of this decision is that a surviving spouse can take over this larger benefit if their own benefit is lower.
Longevity Risk and Break-Even Analysis
Whenever I am asked “when should I file for Social Security?” I jokingly reply – tell me exactly how long you will live, and I will tell you exactly when to claim! Afterall, a key consideration for timing your benefits is longevity – something we can only predict. In a nutshell, if you expect to live well into your 80s or beyond, delaying your benefit will yield higher lifetime income. However, if you don’t expect to be around that long – claiming earl can result in receiving more total benefits. When we apply math to this equation, we calculate a “break-even age”, or the age at which your total benefits from delaying will equal your total benefits if claiming early. This age typically falls in your late 70s or early 80s. Therefore, if you expect to live longer than age 80 – delaying your benefits would make mathematical sense.
Spousal and Survivor Considerations
An often-overlooked factor when claiming Social Security is the effect on spouses and survivors. Benefits received by spouses and survivors are directly tied to the higher earner’s claiming age. If the higher-earning spouse delays benefits, it not only increases their own benefit but also boosts the survivor benefit the other spouse may rely on later. For married couples, coordinating claiming strategies can add significant value over time. For example, one spouse may claim earlier to provide income while the higher earner delays to maximize long-term benefits. This can be especially impactful if one spouse lives much longer than the other.
Making the “Right” Decision
While the financial math is important, the “right” time to claim Social Security is not purely a numbers decision. Health status, employment plans, lifestyle goals, and risk tolerance all play a role. Someone in poor health or with immediate income needs may benefit from claiming early, while those with longevity in their family and sufficient savings might benefit from waiting.
Importantly, Social Security is not a one-size-fits-all decision. The optimal strategy balances financial efficiency with personal priorities.
The timing of claiming Social Security benefits is one of the most impactful and irreversible decisions in retirement planning. It affects not only how much you receive each month, but also how long your assets last, your tax exposure, and the financial well-being of your spouse and survivors.
By carefully evaluating your options and considering both financial and personal factors, you can turn Social Security into a strategic advantage—one that supports a more secure and confident retirement. If you or someone you care about is struggling to put these pieces together, our team is here to help!
Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Josh Bitel, CFP® and not necessarily those of Raymond James.
There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.
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