Social Security: Delay or Take the Money and Run—Act II

by Robert Muksian

Social Security: Delay Or Take The Money And Run—Act II Splash image

A dilemma facing workers who have reached their full retirement age (FRA) is whether to take the Social Security benefit and continue working or wait to take advantage of an increased regular benefit and a significant delayed retirement credit.

I addressed this question in the August 2000 issue of the AAII Journal [“Social Security Benefits at 65: Delay, or Take the Money & Run?”], but with a “new” group of AAII members approaching elective retirement, this is a topic worth reviewing.

Determination of the Social Security Benefit

The Social Security benefit is based on indexed wages from the year of age 22 through the year of age 59 plus actual wages for the year of age 60 through the year prior to the elected retirement year (e.g., 2010 for those electing to take benefits in 2011). In order to determine indexed wages, an index factor for each year is calculated by dividing the national average wage index (NAWI) for the age-60 year by the NAWI for each year from the year of age 22 through the year of age 59. Indexing stops with the age-60 year. Then, the actual Social Security taxable wage earned each year, up to the limit for Social Security payroll (FICA) taxes, is multiplied by the corresponding index factor. The largest 35 of these indexed wages are totaled, and that sum is divided by 420 (12 months per year times 35 years) to obtain an average indexed monthly earnings (AIME) amount.

The earliest that Social Security benefits may be taken electively is at age 62. A formula is applied to the AIME such that more of the wages are included in the benefit for low wage earners than are included for high wage earners. The 1977 Amendments to the Social Security Act established bend points that are used to determine a person’s primary insurance amount (PIA) from the AIME.

Although these bend points are indexed with the national average wage index, the Consumer Price Index for Urban Workers (CPI–W) of the fourth quarter of the federal fiscal year (July, August and September) has a direct effect on which bend points are applicable for the age-62 year. The average CPI–W of the fourth quarter of the current year, 2010, is compared to the average CPI–W of the fourth quarter for the most recent year that a cost-of-living adjustment (COLA) was positive, which was 2008. If the difference between these two CPI–Ws is positive, that value would be the amount of the cost-of-living adjustment. Since the latest difference between the two is –0.6%, there is no cost-of-living adjustment for 2011. (Benefits are never reduced.) Therefore, the bend points of 2010 are used for retirement in 2011 at age 62. Table 1 summarizes the Social Security benefits for average and maximum wages earners who might elect to retire in 2011.

Sum of
Indexed Earnings
Average Indexed
Monthly Earnings
Insurance Amount
Initial Benefit
at Avg
at Max
at Avg
at Max
at Avg
at Max
at Avg
at Max
62 1,447,320 3,377,640 3,446 8,042 1,544.10 2,427.30 1,164 1,830
66 1,311,240 3,065,580 3,122 7,299 1,393.40 2,186.20 1,508 2,366
70 1,198,680 2,806,860 2,854 6,683 1,264.70 1,974.90 2,044 3,193

Factors for the Decision Process

The Social Security benefit for those who elect to retire prior to full retirement age is reduced for early retirement (ages 62–65 for those born between 1946 and 1954). The formula for the reduction is five-ninths of a percent per month for the first 36 months of early retirement plus five-twelfths of a percent per month for the next 24 months. Thus, for a full retirement age of 66, if a person takes benefits at age 62, the maximum reduction is 25% of the primary insurance amount calculated as of the year of age 61, 48 months earlier. However, only those born on the first day of the month are considered to be 62 in the month of their 62nd birthday. All others must wait one month for the first benefit, and therefore those people have retired 47 months early with a reduction of 24.583%. The initial benefits in Table 1 for age 62 are 74.417% of the respective primary insurance amounts. The cents are dropped after the multiplication, therefore the reduction is slightly greater than the formula calculates.

In reality, however, the reduction is significantly greater than indicated by the formula. To the primary insurance amount at the age-62 year, four cost-of-living adjustments would be applied to arrive at the benefit for age 66. With wage increases and cost-of-living adjustments of 3% per year, had the maximum wage earner waited until age 66, instead of taking benefits at age 62, his benefit would have been $2,795. This makes the $1,830 benefit an effective reduction of over 35%. In reality the benefit at age 66 would be almost 53% greater than the age-62 benefit.

From a purely economic perspective, it would seem prudent to delay and not “take the money and run” at age 62. Additionally, there is an earnings limit for wages ($1,180 per month in 2011) between 62 and the full retirement age. One dollar out of every $2 in earnings above the limit is withheld. Health care insurance could also be a problem unless a working spouse has coverage up to the Medicare age of 65.

Another important consideration is the length of time before total benefits from both options (early and delayed) are equal—the breakeven age. Table 2 shows the breakeven ages and benefits between age 62 and age 70 for a 62-year-old in 2011, assuming a birth month of February and the first benefit in March. Should the retiree survive beyond the breakeven age, it would have been an economic mistake to “take the money and run.”

At Average Wages At Maximum Wages
(Years, Months)
(Years, Months)
62 1,164     1,830    
63 1,282 74, 1 217,531 2,025 73, 5 321,043
64 1,431 73, 8 209,183 2,272 73, 0 277,599
65 1,591 74, 1 217,531 2,526 73, 6 323,652
66 1,750 74, 11 234,624 2,795 74, 5 352,744
67 1,954 75, 3 241,616 3,125 74, 10 366,181
68 2,171 75, 10 253,940 3,474 75, 5 385,396
69 2,402 76, 5 266,529 3,844 76, 2 410,474
70 2,649 77, 2 282,959 4,236 76, 11 436,134

For a person who will be 62 in 2011, full retirement age is 66. With a life expectancy of 81 (based on the 2004 United States Life Tables of the Department of Health and Human Services), the probability of a male surviving to 66 is about 94%. With a life expectancy of age 84, the probability of a female surviving to 66 is about 96%. Therefore, unless there are other considerations, delaying benefits from age 62 to age 66 appears to be worth the wait.

The delay to age 66 facilitates two factors: (1) an increase in Social Security benefit due to four additional years of work and (2) the option to collect benefits and continue working with no payback of benefits—there is no earnings limit once the full retirement age has been reached. The breakeven ages and total benefits between age 66 and age 70 are shown in Table 3 for a 66-year-old in 2011 with a birth month of February taking the first benefit in March. Should the retiree survive beyond the breakeven age, it would have been an economic mistake to “take the money and run.”

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Table 3. Breakeven Ages and Benefits Between Ages 66 and 70

Age At Average Wages At Maximum Wages
(Years, Months)
(Years, Months)
66 1,508     2,366    
67 1,683 76, 4 237,104 2,651 75, 11 355,727
68 1,869 77, 2 258,103 2,956 76, 8 385,108
69 2,068 77, 11 277,453 3,281 77, 6 418,448
70 2,280 78, 9 199,534 3,622 78, 4 452,587

The magnitude of the benefits for the average-wage earner virtually mandates delaying taking benefits until age 66 or later because it might be unrealistic to assume that an average-wage worker would be vested in a retirement plan that would provide an appropriate supplemental benefit. With approximately $14,000 from Social Security, he would need supplemental income between $18,000 and $26,000 in the first year to have a retirement income between 80% and 100% of the final-year wage. In addition, he will have to address the problem of health care insurance. Further, the monthly benefit four years from now, in 2015, will have been increased by about 50% (from $1,164 to $1,750), a $586 increase. This would give the worker an option to increase total income from the average amount of about $45,000 to about $66,000, of which only $45,000 would be subject to FICA taxes. Probably only 50% of the Social Security benefit would be subject to income taxes. Lastly, by delaying to age 66, the $586 additional benefit might be used to pay the premium for decent Medicare Supplement insurance for a couple.

Full Retirement Age: Delay or Take the Money and Run

It is the maximum-wage earner who is not in need of the benefit at the full retirement age. Therefore he or she has the option of taking or delaying Social Security, given wages in excess of $106,800 in 2011. The monthly benefit after age 66 could increase as a result of two factors: (1) the wages earned each year a worker is employed might replace wages of a lower-earnings year from the previous 35 years in the monthly earnings calculation and (2) after four to eight cost-of-living adjustments are applied, a delayed retirement credit of 8% simple interest would increase the primary insurance amount by up to 32%. (Benefits are mandatory at age 70.)

Table 4 shows the annual Social Security benefits for starting the benefit at age 66 and at age 70. It indicates that the total benefit for the delay exceeds the full retirement age benefit between ages 78 and 79. That is, breakeven is between ages 78 and 79.

Age Year Annual Benefit ($) Accumulation ($)
Age 66
Age 70
Age 66
Age 70
66 2011 23,660*   23,660  
67 2012 29,243   52,903  
68 2013 30,120   83,023  
69 2014 31,023   114,046  
70 2015 31,953 36,220* 145,999 36,220
71 2016 32,911 44,767 178,910 80,987
72 2017 33,898 46,110 212,808 127,097
73 2018 34,914 47,493 247,722 174,590
74 2019 35,961 48,917 283,683 223,507
75 2020 37,039 50,384 320,722 273,891
76 2021 38,150 51,895 358,872 325,786
77 2022 39,294 53,451 398,166 379,237
78 2023 40,472 55,054 438,638 434,291
79 2024 41,686 56,705 480,324 490,996
80 2025 42,936 58,406 523,260 549,402
81 2026 44,224 60,158 567,484 609,560
82 2027 45,550 61,962 613,034 671,522
83 2028 46,916 63,820 659,950 735,342
84 2029 48,323 65,734 708,273 801,076
85 2030 49,772 67,706 758,045 868,782

With a life expectancy age of 82, the probability of a 70-year-old male reaching age 79 is about 64%. Should he survive to age 82 he will have received $58,488 more Social Security benefits by the delay. With a life expectancy age of 85, the probability of a 70-year-old female surviving to age 79 is about 74%. Should she survive to age 85, she will have received $110,737 more in Social Security benefits by the delay. The respective delayed benefits increase the longer each person survives beyond their respective life expectancies.

The foregoing analysis implies that it is worth waiting until age 70 in order to take advantage of the delayed retirement credit, in addition to the greater primary benefit. Should the primary worker die during the delay, the surviving spouse will receive the greater of his or her own benefit or the worker’s delayed benefit, so the worker’s Social Security taxes will not have been paid in vain. If the primary worker is at the full retirement age and if the spouse is at least 62, the spouse is entitled to a benefit between about 35% and 50% of the primary worker’s benefit. The spouse could begin receiving benefits while the worker could suspend his or her benefit until a later age. (Information about spousal benefit options may be obtained at the Social Security Administration website, Thus, the spouse could receive a benefit between about $833 and $1,183, while the primary worker continues to work and delay benefits. The disposition of the worker’s benefit could be a factor in the decision to delay or not delay.

The ideal case for an individual is that he will have a retirement plan that will provide all the funds necessary during retirement and that the post-income-tax Social Security benefit will be invested as a legacy to his estate. Table 5 shows the age-66 and age-70 monthly benefit to be $2,366 and $3,622, respectively.

Age Year Early Beginning Full Beginning Age 70 Retirement
66 2011 2,366 17,889* 17,889      
67 2012 2,437 22,183 40,787      
68 2013 2,510 22,849 65,268      
69 2014 2,585 23,534 91,412      
70 2015 2,663 24,240 119,309 3,622 27,385* 27,385
71 2016 2,743 24,967 149,049 3,731 33,959 62,440
72 2017 2,825 25,716 180,727 3,843 34,978 99,915
73 2018 2,910 26,488 214,444 3,958 36,027 139,939
74 2019 2,997 27,283 250,304 4,077 37,108 182,645
75 2020 3,087 28,101 288,418 4,199 38,221 228,172
76 2021 3,180 28,944 328,898 4,325 39,368 276,667
77 2022 3,275 29,812 371,867 4,455 40,549 328,283
78 2023 3,373 30,707 417,448 4,588 41,766 383,180
79 2024 3,475 31,628 465,774 4,726 43,019 441,525
80 2025 3,579 32,577 516,982 4,868 44,309 503,495
81 2026 3,686 33,554 571,215 5,014 45,638 569,274
82 2027 3,797 34,561 628,624 5,164 47,008 639,052

Thus, for a post-income-tax investment rate of 4% and combined federal and state income tax rate of 30%, breakeven occurs between ages 81 and 82, as is shown in Table 5.

If aftertax rates of return are greater than 4%, the breakeven ages increase to “never” at a rate of return of 11.23%. Table 6 shows these ages and accumulations for returns between 4% and 10%, inclusive.

Table 6 brings life expectancy into greater perspective. If an individual can reasonably expect to earn an aftertax rate of return of 5% in a mix of stocks and bonds, for example, breakeven would be at his or her approximate life expectancy age of 82. This suggests that it would be prudent to “take the money and run” at the full retirement age as a precaution against not surviving to 82. The female would have an additional three years, but at 82 she would have an accumulation of over $700,000, and that might be sufficient reason for her to also “take the money and run” at the full retirement age. These breakeven ages and accumulations would be further extended if a spousal benefit is also invested. For the maximum wage earner, the combined benefit at age 66 would be $3,549 and the benefit at age 70 would be $4,994, based on wage increases and cost-of-living adjustments of 3%. At the 4% aftertax rate of return, the breakeven age would be 87, which is beyond the life expectancy of both male and female; therefore, it might be prudent to “take the money and run.”

(Years, Months)
4.00 81, 2 15.2 580,490
5.00 82, 3 16.3 700,490
6.00 83, 7 17.6 873,976
7.00 85, 3 19.3 1,141,171
8.00 87, 6 21.5 1,604,439
9.00 90, 10 24.8 2,578,889
10.00 96, 8 30.7 5,582,487
11.23 Never Never N/A


This analysis indicates that the decision of whether to begin Social Security benefits at age 62 depends upon two factors. If the worker has a retirement plan that, when combined with the Social Security benefit, replaces to a great extent the final-year wages, and if health care insurance is not a problem, taking the benefit at age 62 would be reasonable. If this benefit is based on a spouse’s work history, the worker might delay taking benefits until full retirement age to take advantage of the greater benefit and up to eight years of greater income for the family. If the worker is in good health, the breakeven age occurs prior to life expectancy age and the total income at that age will be greater because of the delay. Should the primary worker die during the delay, the spouse would receive the larger of his or her own benefit or the worker’s delayed benefit.

The individual who has delayed taking Social Security benefits until his or her full retirement age faces a slight dilemma. Workers who have attained full retirement age can collect benefits and continue working without a payback of any Social Security benefits. (Actually, those wages need not even be reported to the Social Security Administration.) There is no question if the individual simply retires. But if the individual is going to continue to work, the economic consideration is “breakeven.”

Breakeven for average- and maximum-wage earners is in the latter half of the 13th year (between ages 78 and 79). Life expectancy at age 66 is approximately 16 more years for a male and 19 more years for a female. Thus, for all wage earners, if an individual is not in good health, taking the benefit is indicated. If he or she is in good health, delaying the benefit is indicated for the maximum-wage earner. Since benefits are automatic at age 70, greater retirement income will be available with reasonably good probabilities of surviving beyond the breakeven age.

It seems reasonable that the average-wage earner would use the Social Security benefit to add to their lifestyle, and so taking the benefit is indicated at age 66. The maximum wage earner may never need the benefit and would simply invest the aftertax amount. At aftertax rates of return between 4% and 10%, the breakeven age is at least the life expectancy of a male and just short of the life expectancy of a female; therefore, taking the benefit at age 66 is indicated. Should the combined worker and spousal benefit be invested, the breakeven age is well beyond both life expectancies and, again, taking the benefit at age 66 is indicated.

Robert Muksian is a professor of mathematics at Bryant University in Smithfield, Rhode Island.


D from CA posted over 3 years ago:

Yeah, sure, great- so I should wait until I turn 66 (my full retirement age)? Well, I am 62 now, and it occurs to me that you have based your conclusion that it is better to wait on two key assumptions, neither of which you have identified in your article:
1) that I will live the additional four more years until I would reach age 66; and
2) that Social Security will continue to exist in its present form and formulas four years from now.
So, I ask you now:
1) Can you guarantee me that I will still be alive four years from now?
2) Can you guarantee us all that Social Security will still exist in its present form and formulas four years from now?
Let me save you some time. The correct answers are:
1) No.
2) No.
Further, you apparently did not take into consideration that the payments received by people retiring at age 62 can be invested and return interest, compounding during that four year period ending at age 66. Even if I would live until age 66, who's to say I wouldn't be run over by a truck two weeks later? Or whatever.
I turned 62 in January. I took into account all of the above and cashed in immediately, and I am already receiving (and using and banking) my payments.

Laura from MA posted over 3 years ago:

Teachers and other government employees may find that their pensions cancel out any social security benefits they would otherwise be entitled to based on their spouse's earnings.

From the SSA site:

"NOTE: If your spouse will receive a pension for work not covered by Social Security such as government or foreign employment, the amount of his or her Social Security benefits on your record may be reduced."

Steve from MI posted over 3 years ago:

D from California has this one right, take the money sooner rather than later, either spend it or invest it, it really doesn't matter. SS is doomed, demographically it just is unsustainable. Speaking of unsustainable, what about the debt per tax payer? We haven't even factored in the cost of National Health Care, or Medicare and Medicaid, all completely unsustainable and big drains of resources that we don't have. Anyone who thinks this stuff just won't implode is delusional. Watch David Walker's video "I.O.U.S.A", and if you then think it's a great idea to delay taking benefits, we'll could I interest you in a bridge or two?

R from AL posted over 3 years ago:

D needs to re-read the article as it explicity takes account of earning interest on the proceeds of social security. D also needs to read a book on statistics so he can appreciate the notion of probability. Since he lives in California he indeed might die before age 66 with a greater than average probability. On the other hand, as California is the land of milk and honey and fruits and nuts, he might live untill he is 110. If the latter is the case, taking social security at 62 was a bad idea. Live long and prosper, D. The bottom line of the article is that the actuaries designed the options correctly. So you can beat the system only if you have good reason to think you'll die before or after the expected age of death, or you can earn more than 4% after tax on an asset no more risky than a US Government bond.

Navin from WA posted over 3 years ago:

Very helpful and also raises some questions. If one retires at the age 62 can they still get the COLA adjustment to the benefit amount or does one have to wait until full retirement age to receive COLA adjustments?

Barry from MN posted over 3 years ago:

I find the comments about SS being demographically doomed amusing. Wake up from the opinion altering flap that is being put out. Go research the actual data available on the social security trust fund. The fund is basically ok. The problem is that the funds have been borrowed to our government to fund other uses. These are the funds you and/or your employer in-trusted to the trust fund to fund your retirement. Mind you i'm not talking about Medicare here, that's a different story. The government owes this debt back to the fund and if they pay it back SS is in good shape. The issue here is that the rich who pay the majority of taxes would rather not have them raised to repay this over spending. They would rather see SS benefits cut back so that just get by pensioners carry the burden. The rich get richer and poor get poorer. The gap just keeps getting wider. Wake up. The fund taken by it's self is in good same. Policies that create inflation have the same effect.

Michael from WI posted over 3 years ago:

Barry from MN has it right. The only SS delusion is that it is going bankrupt. Go to the SS site and do a little research if you are in doubt. If we don't "fix" it, eventually we will all get 70 cents on the promised dollar. Hardly bankrupt. And there are easy fixes. Increase the max amount subject to the tax, increase the taxable benefit, etc. which would make it sustainable for another 75 years. By the way, despite the anti SS rhetoric from the right (who would privatize it), SS is not just a retirement program.

John from MN posted over 3 years ago:

Too bad D from Cali bought into the scare talk about SS. And the author dealt explicitly with life expectancy, using averages, so read it carefully again. He can only talk about averages but not everyone is average. If you know something about your own health risks, then act accordingly, but it's an individual decision as the author makes clear.

Paul from CA posted over 3 years ago:

A couple of things are not clear to me:
1. Even if I take benefits at 62, don't I get an annual COL adjustment? The author seemed to treat that as available only for someone who waited for full retirement age.
2. Do the enhanced earnings the author shows for higher ages include the assumption that the person continues to work, thus replacing lower wages with higher wages in the benefit calculation? Or are the enhanced wages due only to the longer wait before starting to collect?

I believe a fair comparison would be if the enhanced amounts were due only to the wait, and not from continued employment. After all, it is a lot nicer being on the beach at Maui than slogging to the office every day for an extra 4 years!

Hans from FL posted over 3 years ago:

When I read all the comments about the article, I can only see a lot of emotions and it sounds like a lot of Republicans. My recommendation is, start take your SS at 62, then there is more money left, when I take it at 70. The SS fund is still liquid until 2030 or so, so why worry??. Has any of You thought about gthe spousal benefit which is much higher if you delay? it looks like everone is in business for him/herself, so take the money and run, the government ist just going to enjoy it Hans

Maynard from TX posted over 3 years ago:

One factor that seems to be ignored in many of these studies are situations where a person wants to keep income as low as possible after reaching age 70 1/2 due to the tax burden incurred from RMDs. In some cases one may be in a lower tax bracket prior to the RMD era whereupon it may be more advantageous to take SS benefits at age 62. This may especially be the case if the benefits can be invested. When you factor in the tax implications for such circumstances the breakeven age can easily be in the 80's.

Scott from OR posted over 3 years ago:

1. It appears from table 2 that age 64 is the best break even for a max earning individual. Did I read that wrong?
2. The discussion needs to include the spousal factor. My spouse worked part time until kids left home, then retired early. She will receive min SS next year (both 61). Consequently, at some point she will switch to spousal SS. What is break even point for my SS given it will fund both my and spousal? (assuming I effectively stop work at age 62).
3. So, if I assume 6% ROI, what is the answer to question 2?

Roger from TX posted over 3 years ago:

Robert, I enjoyed reading your article today. I’ve heard the range of advice on this subject since I retired recently. My wife and I are both 58. My broker thinks 62 is the right age to start receiving SSA benefits. Probably because he figures I’d leave more assets in my IRA that way! I’m reasonably confident my wife and I have sufficient personal assets to manage into our 90’s. We’ve moved often, and still have a (3.75% fixed-rate) home mortgage on which I’ve scheduled payments to have paid when we turn 70. We also plan to apply to receive SSA benefits at age 70. I doubt either of us will last to the breakeven point. But I guess we don’t feel like we need to “win” by picking the optimum age at which to receive SSA benefits. We just want to have enough to live on comfortably until we die. This plan should give us a nice cushion in case the market performance reduces our assets quite a lot. If that happens, I’d still expect to have the next twelve years covered. Not that we really need to make the SSA decision now, but age 70 seems like the appropriate age for us.

Chris from NJ posted over 3 years ago:

Enjoyed the article, but want to state up front how much I appreciate the frank, helpful, and "stay with the facts" comments here...since the variables in the equation can't be assumed (health, income from 62-66, financial situation) we need a starting point. Robert has done that, and we can tweek to meet our needs. noting of course that things continually change...(plans are worthless, but planning is invaluable)..take Roger from Texas...what if there's an opportunity to pay off the mortgage at age 68?
Anyway...Well done, and thanks for the article.

Gregory from NJ posted over 3 years ago:

I did an analysis for my wife, 62 vs. 66. The breakeven point was 15 years. And if one assumes that the funds taken earlier are invested, the breakeven point is even furthewr out in time.

Richard from FL posted over 3 years ago:


Stephen from MA posted over 3 years ago:

I'm afraid that some of us just want to stop working; worryig about a crossover point 16 years ahead seems foolish, though I greatly appreciate the details of the article and will reread it. I just resigned from one job that provides 1/2 my income and will leave the other next September, when I am 64, to get SS. One fact I missed in the article or not mentioned is that only earned income subtracts $ from your benefits, should you retire before your allotted age. Those who are nimble enough or wealthy enough to make $ from trading stocks or getting bond interest ie. unearned income lose none of their SS benefits, no matter how early they retire.

Dennis from TX posted over 3 years ago:

This is the most thorough and factually precise article I've ever read on the subject, and I thank Robert for all his hard work on it. It's too bad so many folks misread it or misunderstood basic actuarial reasoning, or injected politics into the discussion which makes planning subject to ideology, not data. Scott Burns suggested treating SS like a fixed-income annuity, which made sense to me, so I'm waiting until 70 based on my good health and that guaranteed 8% return. No one has been able to match that in the last decade. This article, if carefully read, gives you all the data you need to make a wise decision based on your individual situation.

Barney from CO posted over 3 years ago:

I am 72 now and took SS at 62. I would like to pay the difference now and go back to start it when I was 65. I can't seem to get a straight answer from anyone. I know this may be another article.



Douglas from AZ posted over 3 years ago:

SS will likely be around long after all of us are gone, but I believe that there is a relatively high probability that it will eventually (and likely in the not too distant future) be means tested. The benefits one receives will be adjusted based one's level of other income. So for those who have saved and have a decent level of income from interest and dividends, as well as from pensions, annuities or other sources, SS benefits will be reduced, and in some cases eliminated. So if you think means testing might affect you, factor its probability into your decision as to when to begin taking benefits. Sooner rather than later is probably wise for those of us likely to be impacted by means testing.

Milton from NJ posted over 3 years ago:

If one spouse has a low PIA (or has not worked enough to claim social security benefits on their own earnings) and is the spouse with the longer life expectancy, it is likely advantageous for that spouse to claim spousal benefits at 66, since spousal benefits do not accrue delayed retirement credits beyond full retirement age. Meanwhile, the high PIA spouse can delay retirement and accrue delayed retirement benefits in order to maximize the surviving spouse's eventual benefits.

The exact analysis needs to take into account both spouses' income records, ages, life expectancy, health, and marital status.

J from VA posted over 3 years ago:


i believe that loophole (pay back and recalculate benefits) was closed late last year or january of 2011

it was too good to be true

a second unrelated question - if you expect your net income to take a substantial upward bounce as you reach full retirement age and the govn't decides to means test social security benefits based on income - are you not better off to take the lower amount at age 62 and at least get something before the exclusion hits

Roger from AZ posted over 3 years ago:

Having considered the two sides of the issue it all boils down to what you believe the future holds for both you as an individual and for the United States Government. If you believe that your health is good and that you will live long and that the government will honor it promise then wait until age 70 to get social security. However, if you are in poor health or do not believe government will fulfill their promises or that the dollar will have real value years from now then you should take the money now.

Arthur from CA posted over 3 years ago:

This is an excellent article and comments. I will be 62 at the end of this month and my current SS summary report indicates my monthly benefits are $25 lower this year than last. Benefits are not reduced to current recipients but the estimated benefits are reduced to future recipients because of deflation in 2009/2010. I did not notice this mentioned in the article and I may opt for taking SS benefits earlier before my estimated benefits are lowered again. My benefits were lowered by 25, 24 and 20 respectively for 62, 66 and 70 years.

Peter from IL posted over 3 years ago:

the analysis seems to compare the nominal value of benefits. IN my view, the future stream of benefits needs to be discounted by an appropriate interest rate. Money received in 10 years is not worth the same as money received today, even if there is no inflation. In other words, the analysis seems to leave out the time value of money. I did an analysis of discounted returns using 4% interest rate and concluded that the present value of taking the money at 62 was greated than waiting for higher benefits at 66. Also, I agree there is a risk that the system will be changed against those in mid to higher income ranges, so better a bird in the hand than two in the tree.

Gale from IL posted over 3 years ago:

SS is not just a retirement plan, it is an income redistribution plan and a Ponzi scheme where each retired generation, so far, has taken out more than they put in.

It can be fixed by decreasing benefits and/or increasing payments.

Ed from TX posted over 3 years ago:

Way to go...this is clear is mud! Thanks a bunch Doctor Muksian, you get an F on clarity and A+ for ego.

Dennis from KY posted over 3 years ago:

An excellent article, especially as a thought starting, beginning point to motivate each of us to analyze our specific situation. No article can encompass the myriad of individual circumstances we each have. Then you throw in a host of unknowns like health, trust in government, means testing, dollar devaluation, future value discount assumptions, etc. and you have a challenge. No one can get this right for sure unless they can see the future.

Don from TN posted over 3 years ago:

Live longer, take benefits later. Live shorter, take benefits earlier. How's your health? How are your genes?

Out of work and need the money, take the check. Still working, defer the gratification.

Think SS will go bust, cash in now. Think the gov't will keep it going at its current rate, wait.

I think the article deals about as well with all this as can be done in a general piece. The comments help round it out. Thanks AAII.

Michael from RI posted over 3 years ago:

Table1 displays 2011 monthly maxwage benefit
age66=$2366 age70=$3193 (+35%)
Table2 displays age60=2009; monthly maxwage benefit age66=$2795 age70=$4236 (+51.55%)
Table3 displays age60=2005; monthly maxwage benefit age66=$2366 age70=$3622(+53.08%)

Why is the monthly benefit increase from age 66-70 so much higher in tables 2, and 3?

If the age 66- 70 benefit increases from table 1 were used to calculate figures used for breakeven ages, the breakeven age results would be stretched out far longer.

I was 60 in 2007, and the the monthly benefit figures in Table 1 agree with my OCt 7 2010 SS Statements, which I use them for breakeven claculations with very different results.

Thomas from WI posted over 3 years ago:

Thanks for the analysis it provides real numbers to make your personal descisons. How each person needs to discount their future and any potential political discounts that a person feels are appropriate to their peace of mind.

Henry from MA posted over 3 years ago:

I heard somewhere that if the United States allowed one million young people with an average age of 25 immigrate to the US and become part of the taxpaying workforce that social security would be in very good shape for the future. These immigrants would be paying FICA taxes for 40 years and would not be taking any money out.

Dan from TX posted over 3 years ago:

A very thourough & complete article on the factors that (currently) pertain to this question. I applaud the author for the depth and breadth of his analysis. I believe that there will most likely be means testing for benefits at some point in the near future, and also an upward adjustment in the FRA. While SS is not broke, it definitely needs tweaking in order to to continue to function at all. Therefore, I think it makes sense to delay no longer than the FRA before you elect "take the money and run". This is especially if you have substantial means and might be subject to forfeiture. All of this argues for at least some degree of ownership of ones individual contributions, in my opinion.

C from NH posted over 3 years ago:

Robert, this is an excellent article, thoroughly well-thought out, one that provides not simply the mechanics of how ssa arrives at the benefit, but the factors that an individual should consider in determining whether to "strike early" and receive benefits, or withhold. What I particularly like is that you did the math in determining an earlier distribution with regards to "opportunity costs" (i.e receiving a return on current money received from ss).
The two greatest issues should always be: 1) need for income
and 2) current and future health prospects of the individual deciding on when to take the benefit.
If you need the income currently, well the decision is already made. If not, then what are the health-prospects of the individual? If Life Expectancy is short, and you're no longer working ( a factor that could reduce or eliminate an early benefit) then take the benefit.

Anthony from CA posted over 3 years ago:

A time value of money/investment return calculation was done to compare age 66 retirement to age 70, with appropriately variable results depending upon investment returns from 4 to 11.23% Why was this not done for the age 62 vs. 66 calculation?

I'm pretty sure that if you take benefits at age 62, they will increase with COLA between then and age 66. The author did not make clear to me (and I'm an actuary) exactly how the PIA changes during the period from age 62 to age 66. Does it increase with NAWI or COLA? He implied it increases with COLA and says the bend points in the benefit formula increase with NAWI. This is complex and would take several sample calculations over a few NAWI/COLA scenarios in order to draw a correct conclusion.

I also think Hans' point about the income bump when you hit RMD's at age 70 is well taken.

George from TX posted over 3 years ago:

I would like to make certain of one aspect. Wages from the year turning age 22 through the year turning age 60 are used to calculate the benefit? If true, it brings to mind some tough situations involving people who start working later in life. For example, start work at 45 and work to 70 and take benefits yield 16 years of indexed wages (from age 45 to 60) divided by 35 years to get benefit. Even worse, start at 61 and work to 70 and take benefit. In this case the worker gets their 10 years to qualify for their benefit but gets no benefit.

George from TX posted over 3 years ago:

I see that I didn't read very well (prior posting). It states that wages after 60 up to year prior to taking benefits are used.

Marcin from AZ posted over 3 years ago:

Reading some of these comments really scares me. This article just like all articles gives us information to enlighten us to make a more educated decision based on our personal matter. While some say that it makes sense to take your benefit early and invest. Did we forget how many people lost money and have to work longer in the past couple of years. Did social security benefits decrease – No.? Many people say they don’t trust social security or can you guarantee that social security will be around. Well, No, but can you guarantee that your investments will be around? Can you guarantee that the banks will be around? Can you guarantee that someone will not steel your money if you put it under your mattress? The point is nothing in life will work out 100% of the time. What we should be doing is educating ourselves from articles like this and make our own decisions. I thank the author for his time. I did find an error in the article though. Page 14 Robert writes that there is an earnings limit for wages over 1,180 per month in 2011 between 62 and the full retirement age. The correct way to state that is that there is a 1,180 per month wage limit In the FIRST year that the benefit is taken. Second year until Full retirement age it’s based on a yearly amount of 14,160 (not on the monthly wage). In the Year OF when the individual attains their full retirement age they can make 37,680 from January until their full retirement age. If they exceed that amount their benefit will reduce 1dollar for every 3 dollars in excess of 37,680.

Steven from MN posted over 2 years ago:

I found the article most helpful to understand the approximate social security benefit I would recieve, beginning at different ages. It was also somewhat technically complex (I ran the spell check readability statistics on part of it in Microsoft Word), and think it would be helpful for more people if it was simplified a bit in a later issue.

It would also be helpful to cover a bit more the impact of taking Social Security at the earlier time frames and continuing to defer withdrawls from IRA Accounts. This has been our choice, and so far it seems to have been a good decision.

A similar article on the cost of "making it" to Medicare age, and the cost to expect for Supplemental Coverage would be most helpful.

Again, thanks for the helpful article!

Jim from Pa posted about 1 year ago:

Unfortunately a large number of people are payed off after age 50 and cannot find a job. Thatvis a large number of people "retire" early and do not have the choice. Others choose to retire before age 59. According to the calculations on the ss web site if someone retires at age 56, their benefit does not increase with age. Did I run these calculation through the web site incorrectly?

Jim from Pa posted about 1 year ago:

Unfortunately a large number of people are payed off after age 50 and cannot find a job. Thatvis a large number of people "retire" early and do not have the choice. Others choose to retire before age 59. According to the calculations on the ss web site if someone retires at age 56, their benefit does not increase with age. Did I run these calculation through the web site incorrectly?

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