When Should You Start Social Security Benefits? Do the Math!

Last Updated Apr 12, 2011 8:43 PM EDT

My prior post When Should You Start Social Security Benefits? lists the qualitative reasons why it's a good idea to maximize your Social Security benefits by delaying the start date. This post follows up by showing you how to do the math to help you decide the right time to start your Social Security benefits, taking into account your life expectancy and Social Security's rules for increasing benefits if you delay the start date.

The following table shows estimates of the total lifetime income for a single 60-year old person earning $75,000 per year in 2010, for three different ages at which Social Security benefits are initiated: age 62, the "full" retirement age (FRA) when there's no reduction in benefits for early retirement (in this case, age 66), and age 70.

*Estimates are based on a single 60-year-old person earning $75,000 per year in 2010
The first row shows projections of the initial annual Social Security income for the three different starting ages for a person born in 1950. I determined these by using the Social Security Quick Calculator on the Social Security website www.ssa.gov. In this example, the annual Social Security income is $18,000 if you start benefits as early as possible at age 62. It's $24,240 if you wait until age 66, the Full Retirement Age (FRA) if you were born in 1950. And your annual Social Security income is $32,520 if you wait until age 70, the latest you can wait to start benefits.

The second row shows the total income over your life if you live to age 70 and then die. In this case, starting Social Security at age 62 is the best strategy, since the total lifetime income--$144,000--is the highest. If you wait until age 70 to start Social Security income and die at age 70-obviously a bad move, because you get nothing.

The third row shows the total lifetime income if you live to age 80 and then die. In this case, starting Social Security at your FRA is the best strategy, because it provides the highest total lifetime income--$339,360.

The fourth row shows the total lifetime income if you live until age 90 and then die. In this case, starting Social Security at age 70 is the best strategy, since your lifetime income is highest at $650,400.

For the detail-oriented among you, these estimates are in current dollars, and the totals haven't been adjusted for the time value of money. Often I hear people say "I'll take my Social Security early and invest it--I'll be better off." I disagree, and the reasons and analyses are sufficient for a future post devoted to this topic.

For now, though, this table shows why it's good to estimate your life expectancy, taking into account your lifestyle and family history, and I encourage you to do this as part of your retirement planning. Two good life expectancy calculators are www.livingto100.com and www.bluezones.com. You can use your life expectancy estimate and the type of analysis in the table above to help you decide the best time to start your Social Security income.

My earlier post, How Long Do You Have to Live, shows that the average age at death is the early to mid-80s for Americans currently in their 50s and 60s. This suggests that delaying Social Security benefits until FRA or beyond is the best strategy. Yet according to the Social Security Administration, half of all Americans start Social Security at age 62, the earliest possible age with the lowest income, and 75% of Americans start before their FRA.

I encourage you to estimate your own Social Security benefits using your employment history, and it's easy to do online with the Social Security Benefit Calculator.

Is there any time it makes sense to start taking benefits as early as possible? Maybe. If you're in poor health, then the answer might be "yes." But it might still be the wrong answer if you're married, and I'll cover these considerations in a future post.

It's my intent that this post and my previous post give you simple ways to think about the right time to start your Social Security benefits. Please let me know if you have any thoughts or questions in the comments field below.

Want to learn more about retirement planning? Check out my latest creation - an innovative online retirement planning guide Money for Life. I've organized a rich collection of more than 150 blog posts, articles, research reports and video clips on the most important retirement planning decisions regarding money, health and lifestyle.
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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.


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