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A frequent question we receive from clients on the verge of retirement is at what age they should apply for their social security benefits. As with many financial decisions, the answer is complicated by one unknown variable: the client’s expected lifespan.

Basic Background

While the complexities of social security are many and varied (for example, should you file under your own or your spouse’s earnings), here we focus on the question of age—one that affects all beneficiaries no matter how they file.

Stepping back, U.S. citizens can file for social security benefits at any time from age 62-70. The term “Full Retirement Age” (FRA) refers to the expected filing age that the government assumes based on one’s date of birth. Depending on the year of birth, the FRA is between 66 (for those born in 1954 and prior) and 67 (1960 and later). It is at this Full Retirement Age that the benefit amounts you may have seen cited in mailings from the Social Security Administration can be earned.

For those filing early, i.e. before their FRA, a significant penalty is applied. Specifically, filing 3 years before your FRA permanently decreases your monthly benefits by 20%.

Conversely, those who choose to delay social security past their FRA increase their monthly benefits. This increase can be substantial. Someone with an FRA of 67 who waits until 70 to receive benefits will see their monthly social security payment increase 24%! After turning 70, there is no further advantage to delaying payments, as they are capped.

The Crux of the Matter

With that knowledge in hand, we ask two key questions:

-First, do you need social security to cover your recurring expenses, or can you reasonably live off your investments and add social security to your income at age 70? (Determining the answer to this question is largely a mathematical exercise.)

-Second, how long might you expect to live? (Yes, this is a far more difficult question that depends on factors such as your health and family history.)

The graph below can be informative. It shows cumulative potential benefits over time, depending on when they start. (The chart assumes FRA monthly benefits of $3,700, with 3% annual inflation adjustments.)

As shown, the “breakpoint” comes in the early to mid-80’s age range. Individuals who live past this point and can wait to file until age 70 will reap more cumulative benefits over their lifetime than if they had filed earlier. In fact, for someone filing at 70 versus 62 and living to age 100, the added lifetime benefits total approximately $500,000.

Clearly, for some, delaying social security payments can be the prudent financial choice. However, maximizing social security is just one of many considerations in retirement planning, and Mitchell Sinkler & Starr’s portfolio managers are prepared to help clients work through this potentially complex decision.


Peter T. Toscani, CFA, CFP®


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