When to File for Social Security Benefits

Deciding when to file for Social Security benefits is a critical retirement decision. Timing can affect your monthly income, total lifetime benefits, and the financial well-being of your spouse or heirs. Because there’s no one-size-fits-all answer, it helps to look at both the numbers and your personal goals.

The Mathematical Approach – Break-Even Analysis:

From a purely mathematical perspective, the decision comes down to a break-even (B/E) analysis. Filing early (as early as age 62) gives you smaller monthly checks, while waiting until full retirement age (FRA) or even age 70 can increase your benefits significantly. For example, each year you delay past FRA increases your benefit by roughly 8% per year until age 70.

A break-even calculation asks: At what age will the total lifetime benefits received be higher if I delay filing versus if I file early? For many people at or near retirement, the breakeven point falls in the late 70s or early 80s. If one expects to live beyond that age, delaying benefits can maximize lifetime income. If you have health concerns or anticipate a shorter life expectancy, claiming earlier may have some merit. 

An example graph is shown below, illustrating an individual’s B/E age given the following assumptions: Full Retirement age (FRA): 66 & 8 mos, FRA monthly benefit: $1,985, Age 70 monthly benefit: $2,762.

For reference, the illustration below uses an oversimplified 0% discount rate (rate of return on the payments).

The above illustration is intended for educational purposes only.

If this individual files at their FRA (66 and 8 months), they would collect approximately $79,000 in benefits between their filing date and age 70. However, by waiting until age 70 to claim, their monthly benefit increases by about $777. The key question is: how long does it take for that higher monthly check to make up for the 40 months of missed payments? The break-even point comes at around 8.5 years, meaning the individual would need to live past age 78.5 for delaying benefits to provide a greater lifetime payout.

Numbers aside, here are additional factors to weigh:

1.      Spousal Benefits: When one spouse earns significantly more than the other, the timing of benefits can affect both spouses’ lifetime income. Here are two key considerations:

• Spousal Benefits While Both Spouses Are Living: The spouse with the lower earnings may qualify for a benefit worth up to 50% of the higher earner’s full retirement age (FRA) benefit. This is based on the higher earner’s FRA amount, not any delayed benefit amount. If the higher-earning spouse files before reaching FRA, both their own benefit and the spousal benefit are reduced.

• Surviving Spouse Benefits: If the higher-earning spouse passes away first, the surviving spouse can step up to the larger of their own benefit or the survivor benefit. Importantly, if the higher earner delayed filing, the survivor benefit would include that higher, delayed amount.

2.      Employment and Income Needs: If you are still working and elect to claim benefits before your FRA, you could potentially have a temporary reduction in benefits due to the retirement earnings test (RET).  

3.      Taxes: Up to 85% of Social Security benefits are taxable on a federal basis, depending on other sources of income. Social Security benefits are not taxable on a state basis as of the writing of this blog post.

The “right” time to file for Social Security is rarely just about maximizing a formula. It’s about balancing the financial math with your life circumstances, health outlook, and family goals. The best approach is to run the numbers, weigh the trade-offs, and then make the choice that supports both your retirement lifestyle and the legacy you want to leave behind.