How Do I Calculate My Social Security Breakeven Age?

Your Social Security break-even age can help you figure out whether it's better to start collecting Social Security early or wait until later when you can receive a larger monthly payment. It's the point at which the value of waiting to start taking Social Security benefits catches up with and surpasses the value of taking them early. Knowing it can help you determine the optimal age to start taking benefits.

The Social Security Administration provides a calculator to help figure out your break-even age. We'll walk you through how it works and how it can help you decide when to start collecting.

When to Take Social Security Benefits

You can elect to receive Social Security benefits starting at age 62 or as late as age 70, though your full retirement age (FRA) (the age at which you're eligible for full benefits) depends on the year you were born.

For example, your FRA is 67 if you were born in 1960 or later. If you elect to take your benefit before then, your monthly Social Security payment will be reduced by 30%. Although the total number of payments you receive will be higher than if you had waited until your FRA, your total lifetime Social Security income could be lower.

When you reach your FRA, you receive a full benefit based on the amount of Social Security tax paid into the system through your lifetime, up to a maximum monthly benefit amount. Although fewer total checks are received, your total lifetime payout may be higher. It all depends on how long you live.

Those who can defer taking Social Security income until after their FRA are given a delayed retirement credit each year past that age until age 70, equivalent to an annual 8% increase for people born in 1943 or later. Waiting until age 70 results in the fewest number of checks received, but delivers a much higher monthly benefit.

To determine the most appropriate age for you to start taking benefits, you need to calculate your Social Security breakeven age.

How to Calculate the Social Security Breakeven Age

Your Social Security breakeven age is the point in your life when the total of those lower benefit payments comes to equal the total of benefits that you would have received if you waited to take your benefits at FRA, or even later.

For example, if you were born in 1961, your FRA is 67. If you choose to begin receiving Social Security income at age 62 in 2023, then your FRA benefit will be reduced by 30%. Assuming that the full monthly benefit would be $1,000, you will be left with a monthly Social Security check of only $700.

If a co-worker with the same birth date and similar earnings history elects to receive their benefit at FRA five years later, then their benefit will be $1,000 each month. For the first five years, you receive a total of $42,000 (or $8,400 per year), while your co-worker receives nothing, so you are ahead. Once your co-worker starts receiving benefits, however, they get $300 more each month or $3,600 more each year than you do. So when will your co-worker catch up to you in total benefits?

Let’s divide the amount by which you are ahead by the higher amount per year that your co-worker receives. The answer is when you are both 78 years and eight months, or 11.67 years ($42,000 ÷ $3,600), or 140 months after your FRA. After this point, your co-worker will earn more over their lifetime than you will.

The Bottom Line

Of course, the breakeven age will vary based on a person’s FRA and how much their benefits are reduced by how early they choose to take their benefits. In addition, there are other factors that affect when you take retirement over which you may have no control, such as extended unemployment, the need to care for an ill spouse, parent, or child, and cost-of-living adjustments (COLAs).

Still, if you think that you are likely to live past your breakeven age, it’s probably better to defer taking Social Security benefits until your FRA or longer. If you are not sure that you are likely to make it that far, then starting benefits early makes more sense.